As filed with the Securities and Exchange Commission on August 10, 2001.
- --------------------------------------------------------------------------------
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
PEABODY ENERGY CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 1222 13-4004153
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification Number)
Code Number)
--------------------
701 Market Street
St. Louis, Missouri 63101-1826
(314) 342-3400
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
--------------------
Jeffery L. Klinger, Esq.
Peabody Energy Corporation
701 Market Street
St. Louis, Missouri 63101-1826
(314) 342-3400
--------------------
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
--------------------
With a copy to:
Rise B. Norman, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
--------------------
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Title of each Class of Amount Proposed Maximum Proposed Maximum Amount of
to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Unit Offering Price Fee
- ------------------------------------------------------------------------------------------------------------------------------------
8 7/8% Series B Senior Notes due 2008 $317,100,000 --(2) --(2) --(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Guarantees of 8 7/8% Series B Senior Notes
due 2008(1) $317,100,000 --(2) --(2) --(3)
- ------------------------------------------------------------------------------------------------------------------------------------
9 5/8% Series B Senior Subordinated Notes due
2008 $408,300,000 --(2) --(2) --(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Guarantees of 9 5/8% Series B Senior $408,300,000 --(2) --(2) --(3)
Subordinated Notes due 2008(1)
====================================================================================================================================
(1) See inside facing page for table of additional registrant guarantors.
(2) An indeterminate amount of securities will be offered at indeterminate
offering prices solely for market-making purposes.
(3) Pursuant to Rule 457(q), no filing fee is required for the registration of
securities to be offered solely for market-making purposes by an affiliate
of the registrant.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until this registration statement shall become effective
on such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
- --------------------------------------------------------------------------------
Peabody Energy Corporation
8 7/8% Series B Senior Notes due 2008
and
9 5/8% Series B Senior Subordinated Notes due 2008
This prospectus has been prepared for and is to be used by Lehman Brothers
Inc. in connection with offers and sales in market-making transactions of the
notes. We will not receive any of the proceeds from those sales. Lehman Brothers
Inc. may act as a principal or agent in those transactions. The notes may be
offered in negotiated transactions or otherwise.
There is no existing trading market for the notes and we cannot assure you
that one will develop.
Neither the U.S. Securities and Exchange Commission nor any state
securities commission in the United States has approved or disapproved of these
securities or determined that this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
For a discussion of factors that should be considered in connection with
an investment in the notes, see "Risk Factors" beginning on page 5.
-----------------
LEHMAN BROTHERS
-----------------
August ___, 2001
TABLE OF CONTENTS
Page
Prospectus Summary ....................................................... 1
Risk Factors ............................................................. 5
Use of Proceeds .......................................................... 14
Ratio of Earnings to Fixed Charges ....................................... 14
Description of the Senior Notes .......................................... 15
Description of the Senior Subordinated Notes ............................. 41
Plan of Distribution ..................................................... 69
Legal Matters ............................................................ 69
Experts .................................................................. 69
Where You Can Find Additional Information ................................ 69
You should rely only on the information contained in this prospectus. We
have not, and the underwriter has not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriter is not, making an offer to sell the notes in any jurisdiction where
an offer or sale is not permitted. You should assume that the information
appearing in this prospectus is accurate as of the date on the front cover of
this prospectus only. Our business, financial condition, results of operations
and prospectus may have changed since that date.
--------------------
Our principal executive offices are located at 701 Market Street, St.
Louis, Missouri, 63101-1826, telephone (314) 342-3400.
i
PROSPECTUS SUMMARY
This summary may not contain all the information that may be important to
you. You should read the entire prospectus before making an investment decision.
You should carefully consider the information presented under the heading "Risk
Factors."
We are the largest private-sector coal company in the world. Excluding our
Australian operations that were sold in January 2001, we sold 181.6 million tons
of coal in the year ended March 31, 2001, or more than 16% of all U.S. coal
sales. During this period, we sold coal to more than 290 electric generating and
industrial plants, fueling the generation of more than 9% of all electricity in
the United States and 2.5% of all electricity in the world. At March 1, 2001, we
had 9.3 billion tons of proven and probable coal reserves.
We own majority interests in 34 coal operations located throughout all
major U.S. coal producing regions, with 66% of our fiscal year 2001 coal sales
shipped from the western United States and the remaining 34% from the eastern
United States. Most of our production in the western United States is low sulfur
coal from the Powder River Basin. Our overall western U.S. coal production
increased from 37.0 million tons in fiscal year 1990 to 119.7 million tons in
fiscal year 2001, representing a compounded annual growth rate of 11%. In the
west, we own and operate mines in Arizona, Colorado, Montana, New Mexico and
Wyoming. In the east, we own and operate mines in Illinois, Indiana, Kentucky
and West Virginia. We produced 77% of our fiscal year 2001 sales volume from
non-union mines.
For the year ended March 31, 2001, 93% of our sales were to U.S.
electricity generators, 3% were to the U.S. industrial sector and 4% were to
customers outside the United States. Approximately 85% of our fiscal year 2001
coal sales were under long-term contracts. As of March 31, 2001, nearly one
billion tons of our future coal production were committed under long-term
contracts, with remaining terms ranging from one to 16 years and an average
volume-weighted remaining term of four years. As a result of recent significant
improvements in coal prices, we have added long-term contracts to our portfolio
at favorable prices. Additionally, our significant uncommitted future production
positions us well to continue to enter into favorably priced contracts. As of
March 31, 2001, we had approximately 50 million tons, 101 million tons and 129
million tons of expected production available for sale at market-based prices in
2002, 2003 and 2004, respectively.
We are also expanding in related energy businesses that include coal
trading, coalbed methane production, transportation-related services,
third-party coal contract restructuring and participation in the development of
coal-based generating plants.
1
Description of the Notes
Senior Notes
Maturity Date.......... May 15, 2008.
Interest............... 8 7/8% per year, payable in cash.
Interest Payment Dates. May 15 and November 15, commencing November 15, 1998.
Mandatory Redemption... We are not required to make mandatory redemption or
sinking fund payments.
Optional Redemption.... Prior to May 15, 2003, we may redeem the senior notes
at a redemption price equal to 100% of their principal
amount plus the applicable make whole premium, plus, to
the extent not included in the make whole premium,
accrued and unpaid interest to the date of redemption.
On or after May 15, 2003, we may redeem the senior notes
at the redemption prices described in this prospectus,
plus accrued and unpaid interest to the applicable date
of redemption. See "Description of the Senior
Notes--Optional Redemption."
Change of Control...... Upon a change of control, each holder of senior notes
will have the right to require us, and we must offer, to
purchase all or any part of that holder's senior notes
for 101% of their aggregate principal amount, plus
accrued and unpaid interest to the date of purchase. See
"Description of the Senior Notes--Repurchase at the
Option of Holders--Change of Control."
Ranking................ The senior notes are our general unsecured obligations,
rank senior in right of payment to all of our
subordinated Indebtedness and rank equally in right of
payment with all of our current and future unsecured
senior indebtedness, including all borrowings under the
senior credit facilities. However, all borrowings under
the senior credit facilities are secured by a first
priority lien on some of our assets and specified
Domestic Subsidiaries. As of March 31, 2001, we had no
borrowings outstanding under the senior credit
facilities on a pro forma basis, after giving effect to
the use of proceeds from the initial public offering of
our common stock in May 2001. See "Risk Factors--Risks
Relating to the Notes--Our Financial Performance Could
be Adversely Affected by our Substantial Debt."
Senior Note Guarantees. Some of our current and future Restricted Subsidiaries
that are Domestic Subsidiaries fully and
unconditionally, and jointly and severally, guarantee,
or will guarantee, our payment obligations under the
senior notes on a senior basis. The senior subsidiary
guarantees will rank senior to all existing and future
subordinated indebtedness of the senior subsidiary
guarantors and equally with all other unsecured senior
indebtedness of the senior subsidiary guarantors,
including the guarantees of indebtedness under the
senior credit facilities. Each senior subsidiary
guarantor's obligations under the senior credit
facilities, however, will be secured by a first priority
lien on specified assets of that guarantor, and the
senior note indenture restricts, but does not prohibit,
the senior subsidiary guarantors from incurring
additional secured indebtedness. Accordingly, that
secured indebtedness will rank prior to the senior
subsidiary guarantees with respect to those assets. See
"Description of the Senior Notes--Senior Note
Guarantees."
2
Covenants.............. The senior note indenture contains covenants that, among
other things, limit our ability to (1) incur additional
indebtedness and issue preferred stock, (2) pay
dividends or make other restricted payments, (3) create
liens, (4) enter into transactions with affiliates, (5)
sell our assets or (6) enter into mergers and
consolidations. In addition, under certain
circumstances, we will be required to offer to purchase
the senior notes with the net cash proceeds of sales and
other dispositions of assets at a price equal to 100% of
the principal amount of the senior notes, plus accrued
and unpaid interest to the date of purchase. See
"Description of the Senior Notes--Covenants."
Senior Subordinated Notes
Maturity............... May 15, 2008.
Interest............... 9 5/8% per year, payable in cash.
Interest Payment Dates. May 15 and November 15, commencing November 15, 1998.
Mandatory Redemption... We are not required to make mandatory redemption or
sinking fund payments with respect to the senior
subordinated notes.
Optional Redemption.... Prior to May 15, 2003, we may redeem the senior
subordinated notes at a redemption price equal to 100%
of their principal amount plus the applicable make whole
premium, plus, to the extent not included in the make
whole premium, accrued and unpaid interest to the date
of redemption. On or after May 15, 2003, we may redeem
the senior subordinated notes at the redemption prices
described in this prospectus plus accrued and unpaid
interest to the applicable date of redemption. See
"Description of the Senior Subordinated Notes--Optional
Redemption."
Change of Control...... Upon a change of control, each holder of senior
subordinated notes will have the right to require us,
and we must offer, to purchase all or any part of that
holder's senior subordinated notes at a price in cash
equal to 101% of their aggregate principal amount, plus
accrued and unpaid interest to the date of purchase. See
"Description of the Senior Subordinated
Notes--Repurchase at the Option of Holders--Change of
Control."
Ranking................ The senior subordinated notes are our general unsecured
obligations and rank subordinate in right of payment to
all existing and future senior debt and senior in right
of payment to or equally with all of our other
indebtedness. As of March 31, 2001, we had $1,021.4
million of indebtedness outstanding on a pro forma basis
after giving effect to the use of proceeds from the
initial public offering of our common stock, of which
$529.0 million would have been senior debt under our
senior credit facilities (excluding letters of credit)
and the senior notes. See "Description of the Senior
Subordinated Notes--Subordination."
Senior Subordinated
Note Guarantees........ Our payment obligations under the senior subordinated
notes are fully and unconditionally, and jointly and
severally, guaranteed on a senior subordinated basis by
the senior subordinated note guarantors. See
"Description of the Senior Subordinated Notes--Senior
Subordinated Guarantees."
3
Covenants.............. The senior subordinated note indenture contains
covenants that, among other things, limit our ability to
(1) incur additional indebtedness and issue preferred
stock, (2) pay dividends or make other restricted
payments, (3) create liens, (4) enter into transactions
with affiliates, (5) sell our assets or (6) enter into
mergers and consolidations. In addition, under certain
circumstances, we will be required to offer to purchase
the senior subordinated notes with the net cash proceeds
of sales and other dispositions of assets at a price
equal to 100% of the principal amount of the senior
subordinated notes, plus accrued and unpaid interest to
the date of purchase. See "Description of the Senior
Subordinated Notes--Covenants."
4
RISK FACTORS
An investment in the notes involves risks. You should consider carefully,
in addition to the other information contained in this prospectus, the following
risk factors before deciding to purchase any notes.
RISKS RELATING TO THE NOTES
Our financial performance could be adversely affected by our substantial debt.
Our financial performance could be affected by our substantial
indebtedness. As of March 31, 2001, on a pro forma basis after giving effect to
the initial public offering of our common stock and the use of the resulting
proceeds, we had total indebtedness of $1,021.4 million. As of March 31, 2001,
on the same pro forma basis, we had $350.0 million of borrowing capacity under
our senior credit agreement. In addition, in May 2001, we increased our total
borrowing capacity under our and Black Beauty's revolving credit facilities to
$470.0 million. We may also incur additional indebtedness in the future.
Our ability to pay principal and interest on our debt depends upon the
operating performance of our subsidiaries, which will be affected by, among
other things, prevailing economic conditions in the markets they serve, some of
which are beyond our control. We cannot assure you that our business will
generate sufficient cash flow from operations or that future borrowings will be
available under our revolving credit facilities or otherwise in an amount
sufficient to enable us to service our indebtedness or to fund our other
liquidity needs.
The degree to which we are leveraged could have important consequences to
you, including, but not limited to: (1) making it more difficult for us to pay
dividends and satisfy our debt obligations; (2) increasing our vulnerability to
general adverse economic and industry conditions; (3) requiring the dedication
of a substantial portion of our cash flow from operations to the payment of
principal of, and interest on, our indebtedness, thereby reducing the
availability of the cash flow to fund working capital, capital expenditures,
research and development or other general corporate uses; (4) limiting our
ability to obtain additional financing to fund future working capital, capital
expenditures, research and development or other general corporate requirements;
(5) limiting our flexibility in planning for, or reacting to, changes in our
business; and (6) placing us at a competitive disadvantage compared to less
leveraged competitors. In addition, our indebtedness subjects us to financial
and other restrictive covenants. Failure by us to comply with these covenants
could result in an event of default which, if not cured or waived, could have a
material adverse effect on us. Furthermore, substantially all of our assets
secure our indebtedness under our senior credit facility.
Your right to receive payment on the notes is subordinated to that of holders of
our secured debt.
While holders of senior subordinated notes are contractually subordinated
to senior debt, holders of any of our secured indebtedness have claims that are
prior to the claims of the holders of each series of the notes with respect to
the assets securing that other indebtedness. Notably, the senior credit
facilities are secured by liens on specified assets of the guarantors. The
senior notes are effectively subordinated to all of that secured indebtedness.
In the event of any distribution or payment of our assets in any foreclosure,
dissolution, winding-up, liquidation, reorganization or other bankruptcy
proceeding, holders of secured indebtedness will have a prior claim to our
assets that constitute their collateral. Holders of the senior notes will
participate ratably with all holders of our unsecured indebtedness that is
deemed to be of the same class as the senior notes, and potentially with all of
our other general creditors, based upon the respective amounts owed to each
holder or creditor, in our remaining assets. In any of the foregoing events, we
cannot assure you that we would have sufficient assets to pay amounts due on the
senior notes. As a result, holders of senior notes may receive less, ratably,
than holders of secured indebtedness.
As of March 31, 2001, after giving effect to the use of proceeds from our
initial public offering, we had no secured indebtedness under the senior credit
facilities and $406.6 million was available for additional borrowing or for
letters of credit, subject to a $350.0 million borrowing sub-limit. The
indentures permit us to incur substantial additional secured indebtedness in the
future.
Your right to receive payments on the senior subordinated notes is subordinate
to that of holders of our senior debt.
The senior subordinated notes are subordinated in right of payment to all
of our current and future senior debt, which includes borrowings under the
senior credit facilities and the senior notes. However, the senior subordinated
note indenture provides that we will not, and will not permit any of the senior
subordinated note guarantors to, incur or otherwise become liable for any
indebtedness that is subordinate or junior in right of payment to any senior
debt and senior in any respect in right of payment to the senior subordinated
notes or any of the senior subordinated note guarantees. Upon any distribution
to our creditors in a liquidation or dissolution or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding
5
relating to us or our property, the holders of senior debt will be entitled to
be paid in full in cash or cash equivalents before any payment may be made with
respect to the senior subordinated notes. In addition, the subordination
provisions of the senior subordinated note indenture provide that payments with
respect to the senior subordinated notes will be blocked in the event of a
payment default on senior debt and may be blocked for up to 179 days each year
in the event of specified non-payment defaults on senior debt. In the event of
our bankruptcy, liquidation or reorganization, holders of the senior
subordinated notes will participate equally with all holders of our subordinated
indebtedness that are deemed to be of the same class as the senior subordinated
notes, and potentially with all of our other general creditors, based upon the
respective amounts owed to each holder or creditor, in our remaining assets. In
any of the foregoing events, we cannot assure you that there would be sufficient
assets to pay amounts due on the senior subordinated notes. As a result, holders
of senior subordinated notes may receive less, ratably, than the holders of
senior debt.
As of March 31, 2001, the aggregate amount of our senior debt (including
borrowings under the senior credit facilities and excluding letters of credit)
was $736.8 million, and $436.6 million of senior debt was available for
additional borrowing or for letters of credit under credit facilities. The
senior subordinated note indenture permits us to incur substantial additional
indebtedness, including senior debt, in the future.
Our debt agreements restrict our ability to borrow additional funds.
The indentures and the senior credit facilities contain covenants that
restrict our ability to incur additional indebtedness, pay dividends, make
specified investments and capital expenditures, enter into transactions with
affiliates, allow our restricted subsidiaries to make specified payments, make
specified asset dispositions, merge or consolidate with, or transfer
substantially all of our assets to another person, encumber assets under
specified circumstances or restrict dividends and other payments from restricted
subsidiaries. In addition, the senior credit facilities restrict us from
prepaying some of our indebtedness, including the notes. Under the senior credit
facilities, we are also required to maintain specified financial covenants,
including a minimum fixed charge coverage ratio and maximum leverage ratio (each
as defined in the senior credit facilities). We cannot assure you that our
future operating results will be sufficient to enable us to comply with those
covenants, or in the event of a default, to remedy that default. In the event of
a default under the senior credit facilities, we could be prohibited from making
payments of principal and interest on the notes and all amounts due under the
senior credit facilities could be declared immediately due and payable. The
indentures and the senior credit facilities contain cross-default provisions
under which defaults under other indebtedness constitute events of default.
Our ability to offer to purchase your notes in the event of a change of control
may be limited.
Upon a change of control, you will have the right to require us to
purchase all or a portion of your notes at a price equal to 101% of their
principal amount, plus accrued and unpaid interest to the purchase date. The
provisions of the indentures may not protect you in the event of a highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction involving us, if that transaction does not result in a change of
control. A change in control may result in a default under the senior credit
facilities. Upon a default under the senior credit facilities or other future
senior debt, the lenders could prohibit us from repurchasing the notes or could
require us to repay all of that senior debt before repurchasing the notes. The
senior subordinated indenture requires that prior to our repurchasing the senior
subordinated notes upon a change of control, we must either repay all
outstanding indebtedness under the senior credit facilities or obtain any
required consent to that repurchase. If we do not obtain that consent or repay
our outstanding indebtedness under the senior credit facilities, we would be
prohibited from offering to purchase the senior subordinated notes. In that
case, our failure to offer to purchase the senior subordinated notes could
become an event of default under the senior subordinated indenture. If a change
of control were to occur, we cannot assure you that we would have sufficient
funds or would be able to arrange financing to repay all of our obligations
under the senior credit facilities, the indentures and other indebtedness that
may become payable upon the occurrence of the change of control.
There is no trading market for the notes.
There is no existing trading market for the notes, and we cannot assure
you that one will develop. If a market were to develop, the notes could trade at
prices that may be higher or lower than their initial offering price depending
on many factors, including prevailing interest rates, our operating results and
the market for similar securities. Although it is not obligated to do so, Lehman
Brothers Inc. intends to make a market in the notes. Lehman Brothers Inc. may
discontinue any market-making activity at any time, for any reason, without
notice in its sole discretion. We cannot assure you that there will be a liquid
trading market for the notes.
Lehman Brothers Inc. may be deemed to be an affiliate of ours and, as an
affiliate, may be required to deliver a prospectus in connection with its
market-making activities in the notes. We have agreed to file and maintain a
registration
6
statement that would allow Lehman Brothers Inc. to engage in market-making
transactions in the notes. Subject to some exceptions, the registration
statement will remain effective for as long as Lehman Brothers Inc. may be
required to deliver a prospectus in connection with market-making transactions
in the notes. We have agreed to bear substantially all the costs and expenses
related to the registration statement.
Your rights under the notes could be limited by fraudulent conveyance laws.
Under federal bankruptcy law and state fraudulent transfer law, if any of
our company or the note guarantors, at the time it incurred the indebtedness
evidenced by each series of the notes or a guarantee:
.. (a) was or is insolvent or rendered insolvent by reason of that
incurrence, (b) was or is engaged in a business or transaction for which
its remaining assets constituted unreasonably small capital or (c)
intended or intends to incur, or believed or believes that it would incur,
debts beyond its ability to pay those debts as they mature and
.. we or that guarantor received or receives less than reasonably equivalent
value or fair consideration for the incurrence of that indebtedness, then
each series of the notes and the guarantees, and any pledge or other
security interest securing that indebtedness, could be voided, or claims
in respect of either series of the notes or the guarantees could be
subordinated to all other debts of our company or that guarantor, as the
case may be.
In addition, the payment of interest and principal by us under either
series of the notes or the payment of amounts by a guarantor under a guarantee
could be voided and required to be returned to the person making that payment,
or to a fund for the benefit of the creditors of ours or that guarantor, as the
case may be.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, a company would be considered insolvent if:
.. the sum of its debts, including contingent liabilities, were greater than
the saleable value of all of its assets at a fair valuation or if the
present fair saleable value of its assets was less than the amount that
would be required to pay its probable liability on its existing debts,
including contingent liabilities, as they become absolute and mature or
.. it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that on a consolidated basis, we were solvent at
the time the notes were issued and continue to be solvent, do not have
unreasonably small capital for the business in which we are engaged and will not
incur debts beyond our ability to pay those debts as they mature. We cannot
assure you, however, as to what standard a court would apply in making those
determinations or that a court would agree with our conclusions in this regard.
Some of our subsidiaries that are providing guarantees on each series of
the notes have significant liabilities associated with reclamation, workers'
compensation (including black lung), and retiree health care. We have not
analyzed the solvency of these subsidiaries with respect to the standards a
court would apply in making a determination as to the solvency of those
subsidiaries on a stand-alone basis. We cannot assure you that funds may be
realized on those guarantees or that the guarantees issued by that guarantor (if
a court were to determine that that guarantor did not receive fair consideration
or reasonably equivalent value for that guarantee) would not be voided or
subordinated under constructive fraudulent conveyance laws.
RISKS RELATING TO OUR COMPANY
If a substantial portion of our long-term coal supply agreements terminate, our
revenues and operating profits could suffer if we were unable to find alternate
buyers willing to purchase our coal on comparable terms to those in our
contracts.
A substantial portion of our sales are made under coal supply agreements,
which are important to the stability and profitability of our operations. The
execution of a satisfactory coal supply agreement is frequently the basis on
which we undertake the development of coal reserves required to be supplied
under the contract. For fiscal year 2001, 85% of our sales volume was sold under
long-term coal supply agreements. At March 31, 2001, our coal supply agreements
had remaining terms ranging from one to 16 years and an average volume-weighted
remaining term of four years.
Many of our coal supply agreements contain provisions that permit the
parties to adjust the contract price upward or downward at specified times. We
may adjust these contract prices based on inflation and/or changes in the
factors affecting
7
the cost of producing coal, such as taxes, fees, royalties and changes in the
laws regulating the mining, production, sale or use of coal. Failure of the
parties to agree on a price under those provisions may allow either party to
terminate the contract. Over the last few years, several of our coal supply
agreements have been renegotiated, resulting in the contract prices being closer
to the then-current market prices, thus leading to a reduction in the revenues
from those contracts. We have also experienced a similar reduction in coal
prices in new long-term coal supply agreements replacing some of our expiring
contracts. Coal supply agreements also typically contain force majeure
provisions allowing temporary suspension of performance by us or the customer
during the duration of specified events beyond the control of the affected
party. Most coal supply agreements contain provisions requiring us to deliver
coal meeting quality thresholds for certain characteristics such as Btu, sulfur
content, ash content, grindability and ash fusion temperature. Failure to meet
these specifications could result in economic penalties, including price
adjustments, the rejection of deliveries or termination of the contracts.
Moreover, some of these agreements permit the customer to terminate the contract
if transportation costs, which our customers typically bear, increase
substantially. In addition, a majority of these contracts allow our customers to
terminate their contracts in the event of changes in regulations affecting our
industry that increase the price of coal beyond specified limits.
The operating profits we realize from coal sold under supply agreements
depend on a variety of factors. In addition, price adjustment and other
provisions may increase our exposure to short-term coal price volatility
provided by those contracts. If a substantial portion of our coal supply
agreements were modified or terminated, we could be materially adversely
affected to the extent that we are unable to find alternate buyers for our coal
at the same level of profitability. Some of our coal supply agreements are for
prices above current market prices. Although market prices for coal have
recently increased in most regions, we cannot predict whether the current
strength in the coal market will continue. As a result, we cannot assure you
that we will be able to replace existing long-term coal supply agreements at the
same prices or with similar profit margins when they expire. In addition, two of
our coal supply agreements are the subject of ongoing litigation and
arbitration.
The loss of, or significant reduction in, purchases by our largest customers
could adversely affect our revenues.
For fiscal year 2001, we derived 36% of our total coal revenues from sales
to our five largest customers. At March 31, 2001, we had 18 coal supply
agreements with these customers that expire at various times from 2001 to 2015.
We are currently discussing the extension of existing agreements or entering
into new long-term agreements with some of these customers, but we cannot assure
you that these negotiations will be successful or that those customers will
continue to purchase coal from us without long-term coal supply agreements. If a
number of these customers were to significantly reduce their purchases of coal
from us, or if we were unable to sell coal to them on terms as favorable to us
as the terms under our current agreements, our financial condition and results
of operations could suffer materially.
If transportation for our coal becomes unavailable or uneconomic for our
customers, our ability to sell coal would suffer.
Transportation costs represent a significant portion of the total cost of
coal, and as a result, the cost of transportation is a critical factor in a
customer's purchasing decision. Increases in transportation costs could make
coal a less competitive source of energy or could make some of our operations
less competitive than other sources of coal. Certain coal supply agreements
permit the customer to terminate the contract if the cost of transportation
increases by an amount ranging from 10% to 20% in any given 12-month period.
Coal producers depend upon rail, barge, trucking, overland conveyor and
other systems to deliver coal to markets. While U.S. coal customers typically
arrange and pay for transportation of coal from the mine to the point of use,
disruption of these transportation services because of weather-related problems,
strikes, lock-outs or other events could temporarily impair our ability to
supply coal to our customers and thus could adversely affect our results of
operations. For example, the high volume of coal shipped from all Southern
Powder River Basin mines could create temporary congestion on the rail systems
servicing that region.
Risks inherent to mining could increase the cost of operating our business.
Our mining operations are subject to conditions beyond our control that
can delay coal deliveries or increase the cost of mining at particular mines for
varying lengths of time. These conditions include weather and natural disasters,
unexpected maintenance problems, key equipment failures, variations in coal seam
thickness, variations in the amount of rock and soil overlying the coal deposit,
variations in rock and other natural materials and variations in geologic
conditions.
8
The government extensively regulates our mining operations, which imposes
significant costs on us, and future regulations could increase those costs or
limit our ability to produce coal.
General
Federal, state and local authorities regulate the coal mining industry
with respect to matters such as employee health and safety, permitting and
licensing requirements, air quality standards, water pollution, plant and
wildlife protection, reclamation and restoration of mining properties after
mining is completed, the discharge of materials into the environment, surface
subsidence from underground mining and the effects that mining has on
groundwater quality and availability. In addition, significant legislation
mandating specified benefits for retired coal miners affects our industry.
Numerous governmental permits and approvals are required for mining operations.
We are required to prepare and present to federal, state or local authorities
data pertaining to the effect or impact that any proposed exploration for or
production of coal may have upon the environment. The costs, liabilities and
requirements associated with these regulations may be costly and time-consuming
and may delay commencement or continuation of exploration or production
operations. The possibility exists that new legislation and/or regulations and
orders may be adopted that may materially adversely affect our mining
operations, our cost structure and/or our customers' ability to use coal. New
legislation or administrative regulations (or judicial interpretations of
existing laws and regulations), including proposals related to the protection of
the environment that would further regulate and tax the coal industry, may also
require us or our customers to change operations significantly or incur
increased costs. The majority of our coal supply agreements contain provisions
that allow a purchaser to terminate its contract if legislation is passed that
either restricts the use or type of coal permissible at the purchaser's plant or
results in specified increases in the cost of coal or its use. These factors and
legislation, if enacted, could have a material adverse effect on our financial
condition and results of operations.
Mine Safety and Health
Stringent safety and health standards have been in effect since Congress
enacted the Coal Mine Safety and Health Act of 1969. The Federal Mine Safety and
Health Act of 1977 significantly expanded the enforcement of safety and health
standards and imposed safety and health standards on all aspects of mining
operations. Most of the states in which we operate have state programs for mine
safety and health regulation and enforcement. Collectively, federal and state
safety and health regulation in the coal mining industry is perhaps the most
comprehensive and pervasive system for protection of employee safety and health
affecting any segment of U.S. industry.
Black Lung
The Black Lung Benefits Revenue Act of 1977 and the Black Lung Benefits
Reform Act of 1977, as amended in 1981, require each coal mine operator to
secure payment of federal black lung benefits to claimants who are current and
former employees and to a trust fund for the payment of benefits and medical
expenses to claimants who last worked in the coal industry prior to July 1973.
The trust fund is funded by an excise tax on production of up to $1.10 per ton
for deep-mined coal and up to $0.55 per ton for surface-mined coal, neither
amount to exceed 4.4% of the gross sales price.
Coal Industry Retiree Health Benefit Act of 1992
Congress enacted the Coal Industry Retiree Health Benefit Act of 1992,
also known as the Coal Act, to provide for the funding of health benefits for
certain United Mine Workers of America retirees. The Coal Act established the
Combined Fund into which "signatory operators" and "related persons" are
obligated to pay annual premiums for beneficiaries. The Coal Act also created a
second benefit fund for miners who retired between July 1992 and September 1994
and whose former employers are no longer in business. Companies that are liable
under the Coal Act must pay premiums to the Combined Fund. Payments made by our
subsidiaries under the Coal Act totaled $4.1 million during fiscal year 2001.
Environmental Laws
We are subject to various federal and state environmental laws. These laws
require approval of many aspects of coal mining operations, and both federal and
state inspectors regularly visit our mines and other facilities to ensure
compliance.
Surface Mining Control and Reclamation Act. The Surface Mining Control and
Reclamation Act establishes mining and reclamation standards for all aspects of
surface mining, as well as many aspects of deep mining. The Surface Mining
Control and Reclamation Act and similar state statutes require operators, among
other things, to restore mined property in accordance with specified standards
and an approved reclamation plan. In addition, the Abandoned Mine Land Fund,
which is part of the Surface Mining Control and Reclamation Act, imposes a fee
on all current mining operations, the proceeds of which are used
9
to restore mines closed before 1977. The maximum tax is $0.35 per ton on
surface-mined coal and $0.15 per ton on deep-mined coal. The Surface Mining
Control and Reclamation Act also requires operators to meet comprehensive
environmental protection and reclamation standards during the course of, and
upon completion of, mining activities. A mine operator must submit a bond or
otherwise secure the performance of these reclamation obligations. Mine
operators must receive permits and permit renewals for surface mining operations
from the Office of Surface Mining Reclamation and Enforcement or, where state
regulatory agencies have adopted federally approved state programs under the
act, the appropriate state regulatory authority.
All states in which we have active mining operations have achieved primary
control of enforcement through approved state programs. Mining companies must
obtain numerous permits that strictly regulate environmental, health and safety
matters in connection with coal mining. Regulatory authorities exercise
considerable discretion in the timing of permit issuance. Also, private
individuals and the public at large have the right to comment on and otherwise
engage in the permitting process, including through intervention in the courts.
We cannot assure you that our permits will be renewed or granted in the future
or that permit issues will not adversely affect our operations.
As of March 31, 2001, our accruals relating to long-term reclamation
costs, mine-closing costs and other related liabilities totaled approximately
$451.3 million. We incurred $4.1 million of operating expenses for the liability
for fiscal year 2001 and incurred related cash expense of $39.0 million.
The Clean Air Act. The Clean Air Act, the Clean Air Act Amendments and the
corresponding state laws that regulate the emissions of materials into the air
affect coal mining operations both directly and indirectly. The Clean Air Act's
permitting requirements and emission control requirements relating to
particulate matter, such as fugitive dust, including future regulation of fine
particulate matter, can directly affect coal mining and processing operations.
The Clean Air Act also indirectly affects coal mining operations by extensively
regulating the air emissions of sulfur dioxide and other compounds, including
nitrogen oxides, emitted by coal-based electric generating plants.
In July 1997, the Environmental Protection Agency, or EPA, adopted new,
more stringent National Ambient Air Quality Standards for very fine particulate
matter and ozone. State and federal regulations relating to implementation of
the new air quality standards may restrict our ability to develop new mines or
could require us to modify our existing operations, The extent of the potential
direct impact of the new air quality standards on the coal industry will depend
on the policies and control strategies associated with the state implementation
process under the Clean Air Act, and could have a material adverse effect on our
financial condition and results of operations.
The Clean Air Act Amendments also require electricity generators that are
major sources of nitrogen oxide emissions in moderate or higher ozone
non-attainment areas to install reasonably available control technology for
nitrogen oxides, which are precursors of ozone. In addition, the EPA recently
announced final rules that would require 19 eastern states and Washington, D.C.
to make substantial reductions in nitrogen oxide emissions. Installation of
additional control measures required under those rules will make it more costly
to operate coal-based electric generating plants.
In December 2000, the EPA decided that mercury air emissions from power
plants should be regulated. The EPA will propose regulations by December 2003
and will issue final regulations by December 2004. Future regulatory activity
may seek to reduce mercury emissions and these requirements, if enacted, could
result in reduced use of coal if electricity generators switch to other sources
of fuel.
Clean Water Act. The Clean Water Act of 1972 affects coal mining
operations by imposing restrictions on effluent discharge into water. Regular
monitoring, reporting requirements and performance standards are preconditions
for the issuance and renewal of permits governing the discharge of pollutants
into water.
Resource Conservation and Recovery Act. The Resource Conservation and
Recovery Act, or RCRA, which Congress enacted in 1976, affects coal mining
operations by imposing requirements for the treatment, storage and disposal of
hazardous wastes. Coal mining operations covered by the Surface Mining Control
and Reclamation Act permits are exempted from regulation under RCRA by statute.
We cannot, however, predict whether this exclusion will continue.
RCRA excludes certain large-volume wastes generated primarily from the
combustion of coal from being regulated as a hazardous waste pending a report to
Congress and a decision by the EPA either to regulate the coal combustion wastes
as a hazardous waste under RCRA or deem the regulation as unwarranted. The EPA
made its report to Congress in March 1999 and determined in May 2000 not to
regulate coal wastes as a hazardous substance under RCRA. New legislation that
would regulate coal combustion waste as a hazardous waste could cause a switch
to other lower-ash fuels and reduce the amount of coal used by electricity
generators.
10
Federal and State Superfund Statutes. The Comprehensive Environmental
Response Compensation and Liability Act, or Superfund, and similar state laws
affect coal mining and hard rock operations by creating liability for
investigation and remediation in response to releases of hazardous substances
into the environment and for damages to natural resources. Under Superfund,
joint and several liability may be imposed on waste generators, site owners and
operators and others regardless of fault.
Environmental claims have been asserted against us at 18 sites in the
United States. Some of these claims are based on Superfund and on similar state
statutes. These claims are related to non-coal activities of our former
subsidiaries. We had an accrued liability of $48.0 million as of March 31, 2001
for these environmental claims. Our results of operations may be adversely
affected by the remediation costs at these or other sites, and our accrued
liability may not be adequate for these remediation costs.
Global Climate Change. The United States and over 160 other nations are
signatories to the 1992 Framework Convention on Climate Change, which is
intended to limit emissions of greenhouse gases, such as carbon dioxide. In
December 1997, in Kyoto, Japan, the signatories to the convention established a
binding set of emission targets for developed nations. Although the specific
emission targets vary from country to country, the United States would be
required to reduce emissions to 93% of 1990 levels over a five-year budget
period from 2008 through 2012. Although the United States has not ratified the
emission targets and no comprehensive regulations focusing on greenhouse gas
emissions are in place, these restrictions, whether through ratification of the
emission targets or other efforts to stabilize or reduce greenhouse gas
emissions, could adversely impact the price and demand for coal. According to
the Energy Information Administration's Emissions of Greenhouse Gases in the
United States 1999, coal accounts for 30% of greenhouse gas emissions in the
United States, and efforts to control greenhouse gas emissions could result in
reduced use of coal if electricity generators switch to sources of fuel with
lower carbon dioxide emissions.
Our expenditures for postretirement benefit and pension obligations could be
materially higher than we have predicted if our underlying assumptions prove to
be incorrect.
We provide postretirement health and life insurance benefits to eligible
union and non-union employees. We calculated the total accumulated
postretirement benefit obligation under Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," which we estimate had a present value of $1,036.1 million as of March
31, 2001, of which $62.0 million was a current liability. We have estimated
these unfunded obligations based on assumptions described in Note 14 to our
audited financial statements. If our assumptions do not materialize as expected,
cash expenditures and costs that we incur could be materially higher. Moreover,
we cannot assure you that regulatory changes will not increase our obligations
to provide these or additional benefits.
We are party to an agreement with the Pension Benefit Guaranty
Corporation, or the PBGC, and TXU Europe Limited, an affiliate of our former
parent corporation, under which we are required to make specified contributions
to three of our defined benefit pension plans and to maintain a $37.0 million
letter of credit in favor of the PBGC. If we or the PBGC gives notice of an
intent to terminate one or more of the covered pension plans in which
liabilities are not fully funded, or if we fail to maintain the letter of
credit, the PBGC may draw down on the letter of credit and use the proceeds to
satisfy liabilities under the Employee Retirement Income Security Act of 1974,
as amended. The PBGC, however, is required to first apply amounts received from
a $110.0 million guaranty in place from TXU Europe Limited in favor of the PBGC
before it draws on our letter of credit.
Our future success depends upon our ability to continue acquiring and developing
coal reserves that are economically recoverable.
Our recoverable reserves decline as we produce coal. We have not yet
applied for the permits required or developed the mines necessary to use all of
our reserves. Furthermore, we may not be able to mine all of our reserves as
profitably as we do at our current operations. Our future success depends upon
our conducting successful exploration and development activities or acquiring
properties containing economically recoverable reserves. Our current strategy
includes increasing our reserve base through acquisitions of government and
other leases and producing properties and continuing to use our existing
properties. The federal government also leases natural gas and coalbed methane
reserves in the west, including in the Powder River Basin. Some of these natural
gas and coalbed methane reserves are located on, or adjacent to, some of our
Powder River Basin reserves, potentially creating conflicting interests between
us and lessees of those interests. Other lessees' rights relating to these
mineral interests could prevent, delay or increase the cost of developing our
coal reserves. These lessees may also seek damages from us based on claims that
our coal mining operations impair their interests. Additionally, the federal
government limits the amount of federal land that may be leased by any company
to 150,000 acres nationwide. We currently
11
lease or have applied to lease a total of 64,805 acres from the federal
government. The limit could restrict our ability to lease additional federal
lands.
We cannot assure you that our planned development and exploration projects
and acquisition activities will result in significant additional reserves or
that we will have continuing success developing additional mines. Most of our
mining operations are conducted on properties owned or leased by us. Because
title to most of our leased properties and mineral rights are not thoroughly
verified until a permit to mine the property is obtained, our right to mine some
of our reserves may be materially adversely affected if defects in title or
boundaries exist. In addition, in order to develop our reserves, we must receive
various governmental permits. We cannot predict whether we will continue to
receive the permits necessary for us to operate profitably in the future. We may
not be able to negotiate new leases from the government or from private parties
or obtain mining contracts for properties containing additional reserves or
maintain our leasehold interest in properties on which mining operations are not
commenced during the term of the lease. From time to time, we have experienced
litigation with lessors of our coal properties and with royalty holders.
If the coal industry experiences overcapacity in the future, our profitability
could be impaired.
During the mid-1970s and early 1980s, a growing coal market and increased
demand for coal attracted new investors to the coal industry, spurred the
development of new mines and resulted in added production capacity throughout
the industry, all of which led to increased competition and lower coal prices.
Recent increases in coal prices could similarly encourage the development of
expanded capacity by new or existing coal producers. Any overcapacity could
reduce coal prices in the future.
Our operating expenses could increase significantly if the price of fuel
increases.
Operating expenses at our mining locations are sensitive to changes in
fuel prices, particularly diesel fuel prices. We used 80.2 million gallons of
diesel fuel in fiscal year 2001, and our overall fuel expense was 41% higher
($24.2 million) than in fiscal year 2000. If fuel prices continue to increase,
our operating expenses could increase significantly.
Our financial condition could be negatively affected if we fail to maintain
satisfactory labor relations.
As of March 31, 2001, the United Mine Workers of America represented
approximately 37% of our employees, who produced 23% of our coal sales volume in
the United States during fiscal year 2001. Because of the higher labor costs and
the increased risk of strikes and other work-related stoppages that may be
associated with union operations in the coal industry, our non-unionized
competitors may have a competitive advantage in areas where they compete with
our unionized operations. If some or all of our current non-union operations
were to become unionized, we could incur an increased risk of work stoppages,
reduced productivity and higher labor costs. The ten-month United Mine Workers
of America strike in 1993 had a material adverse effect on us. Two of our
subsidiaries, Peabody Coal Company and Eastern Associated Coal Corp., operate
under a union contract that is in effect through December 31, 2002. The United
Mine Workers of America has indicated an interest in seeking early negotiations
for a new contract, although none of the parties are required to do so. Peabody
Western Coal Company operates under a union contract that is in effect through
September 1, 2005.
Our operations could be adversely affected if we fail to maintain required
surety bonds.
Federal and state laws require bonds to secure our obligations to reclaim
lands used for mining, to pay federal and state workers' compensation and to
satisfy other miscellaneous obligations. As of March 31, 2001, we had
outstanding surety bonds with third parties for post-mining reclamation totaling
$651.8 million. Furthermore, we have an additional $77.4 million of surety bonds
in place for our federal and state workers' compensation obligations and other
miscellaneous obligations. These bonds are typically renewable on a yearly
basis. We cannot assure you that surety bond issuers and holders will continue
to renew the bonds or refrain from demanding additional collateral upon those
renewals. Our failure to maintain, or inability to acquire, surety bonds that
are required by state and federal law would have a material adverse effect on
us. That failure could result from a variety of factors including the following:
.. lack of availability, higher expense or unfavorable market terms of new
surety bonds;
.. restrictions on the availability of collateral for current and future
third-party surety bond issuers under the terms of our indentures or
senior credit facility; and
.. the exercise by third-party surety bond issuers of their right to refuse
to renew the surety.
12
Our ability to collect payments from our customers could be impaired if their
creditworthiness deteriorates.
Our ability to receive payment for coal sold and delivered depends on the
continued creditworthiness of our customers. Our customer base is changing with
deregulation as utilities sell their power plants to their non-regulated
affiliates or third parties. These new power plant owners may be special purpose
entities with credit ratings that are below investment grade.
One of our customers, Southern California Edison Company, had its credit
rating downgraded to non-investment grade as a result of the recent electricity
crisis in California. Southern California Edison, which owns 56% of the Mohave
Generating Station, and the other owners of the Mohave Generating Station have a
coal supply agreement that expires in 2005. In fiscal year 2001, we sold 4.8
million tons of coal to the Mohave Generating Station. The owners of the Mohave
Generating Station created a trust account in early 2001 to fund the payment of
coal under the coal supply agreement and have advised us of their obligation,
subject to certain conditions, to cure any defaults of another owner. Our
ability to continue to receive payment from the Mohave Generating Station
depends, in part, on the creditworthiness of Southern California Edison. Failure
to receive payment for Southern California Edison's share of the Mohave
Generating Station deliveries could adversely affect our financial condition and
results of operations. If the creditworthiness of California utilities causes a
general deterioration of the creditworthiness of other utilities, our accounts
receivable securitization program could be adversely affected. On April 6, 2001,
Pacific Gas and Electric Company filed for Chapter 11 reorganization. We do not
have any coal supply agreements with that utility.
Lehman Brothers Merchant Banking controls us and may have conflicts of interest
with other stockholders in the future.
Lehman Brothers Merchant Banking and its affiliates beneficially own 57%
of our common stock on a pro forma basis, after giving effect to our initial
public offering of 15 million shares of our common stock and the exercise by the
related underwriters of an over-allotment option to purchase an additional
2,250,000 shares of our common stock. As a result, Lehman Brothers Merchant
Banking will continue to be able to control the election of our directors and
determine our corporate and management policies, including potential mergers or
acquisitions, asset sales and other significant corporate transactions. We
cannot assure you that the interests of Lehman Brothers Merchant Banking will
coincide with the interests of other holders of our common stock. We have
retained affiliates of Lehman Brothers Merchant Banking to perform advisory
services for us in the past, and may continue to do so in the future.
Our ability to operate our company effectively could be impaired if we lose key
personnel.
We manage our business with a number of key personnel, the loss of a
number of whom could have a material adverse effect on us. In addition, as our
business develops and expands, we believe that our future success will depend
greatly on our continued ability to attract and retain highly skilled and
qualified personnel. We cannot assure you that key personnel will continue to be
employed by us or that we will be able to attract and retain qualified personnel
in the future. We do not have "key person" life insurance to cover our executive
officers. Failure to retain or attract key personnel could have a material
adverse effect on us.
13
USE OF PROCEEDS
This prospectus is delivered in connection with the sale of the notes by
Lehman Brothers Inc. in market-making transactions. We will not receive any of
the proceeds from these transactions.
Ratio of Earnings to Fixed Charges
The following table shows our consolidated ratio of earnings to fixed
charges for the periods indicated.
Predecessor Company
---------------------------------------------------
Six Months April 1, May 20, Total
Year Ended Ended Year Ended 1998 to 1998 to Fiscal Year Ended Year Ended
September March 31, March 31, May 19, March 31, Year March 31, March 31,
30, 1996 1997 1998 1998 1999 1999(2) 2000 2001
---------- ---------- ---------- -------- --------- ------- ---------- ----------
Ratio of
Earnings to
Fixed Charges(1) N/A 3.63 5.62 2.00 1.00 1.03 0.97 1.67
- ---------------
(1) For purposes of this computation, earnings consist of income before income
taxes plus fixed charges. Fixed charges consist of interest expense on all
indebtedness plus the interest component of lease rental expense. Earnings were
insufficient to cover fixed charges by $702.5 million for the fiscal year ended
September 30, 1996, due to a non-cash charge of $890.8 million made pursuant to
the adoption of Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of."
(2) For comparative purposes, we derived the "Total Fiscal Year 1999" column by
adding the period from May 20, 1998 to March 31, 1999 with our predecessor
company results for the period from April 1, 1998 to May 19, 1998. The effects
of purchase accounting have not been reflected in the results of our predecessor
company.
14
DESCRIPTION OF THE SENIOR NOTES
The following is a summary of the material terms of the senior notes and
is qualified in its entirety by reference to the indenture (the "senior notes
indenture") between our company and State Street Bank and Trust Company, as
trustee (the "senior notes trustee").
General
The senior notes were issued under the senior note indenture. The terms of
the senior notes include those stated in the senior note indenture and those
made part of the senior note indenture by reference to the Trust Indenture Act
of 1939. The senior notes are subject to all of those terms, and holders of
senior notes are referred to the senior note indenture and the Trust Indenture
Act. The following summary of the material provisions of the senior note
indenture does not purport to be complete and is qualified in its entirety by
reference to the senior note indenture, including the definitions of a number of
terms used below. Copies of the senior note indenture are available as described
below under "Available Information." The definitions of certain terms used in
the following summary are described below under "--Definitions." For purposes of
this summary, the term "our company" refers only to Peabody Energy Corporation
and not to any of its Subsidiaries.
On May 18, 1998, our company issued $400.0 million aggregate principal
amount of senior notes under the senior note indenture. The senior notes are
general unsecured obligations of our company and rank equally in right of
payment with all current and future senior Indebtedness of our company,
including the Senior Credit Facilities. However, our company and its Restricted
Subsidiaries are parties to Senior Credit Facilities and all borrowings
thereunder are secured by a first priority Lien on certain of the assets of our
company and its Restricted Subsidiaries. As a result, the senior notes are
effectively subordinated to the Senior Credit Facilities to the extent of such
collateral. As of March 31, 2001, on a pro forma basis, after giving effect to
the use of proceeds from the initial public offering of our common stock, no
borrowings were outstanding under the Senior Credit Facilities. The senior note
indenture permits substantial additional borrowings under the Senior Credit
Facilities in the future. Additionally, after the consummation of the initial
public offering of our common stock, we had total borrowing capacity of $470.0
million under the senior credit facilities and revolving credit facilities of
our subsidiary Black Beauty. See "Risk Factors--Risks Relating to the
Notes--Your Right to Receive Payments on the Senior Subordinated Notes is
Subordinate to that of Holders of our Senior Debt."
Under certain circumstances, our company may designate current or future
Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries are not
subject to many of the restrictive covenants contained in the senior note
indenture.
Principal, Maturity and Interest
The senior notes are limited in aggregate principal amount to $550.0
million, of which $400.0 million was issued on May 18, 1998, and will mature on
May 15, 2008. In June 2001, we purchased $82.9 million aggregate principal
amount of the senior notes. Interest on the senior notes accrues at the rate of
8 7/8% per year and is payable semi-annually in arrears on May 15 and November
15 to holders of record on the immediately preceding May 1 and November 1.
Additional senior notes may be issued from time to time, subject to the
provisions of the senior note indenture described below under the caption
"--Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
Interest on the senior notes accrues from the most recent date to which interest
has been paid. Interest is computed on the basis of a 360-day year comprised of
twelve 30-day months. Principal, premium, if any, and interest and Liquidated
Damages, if any, on the senior notes are payable at the office or agency of our
company maintained for such purpose within the City and State of New York or, at
the option of our company, payment of interest and liquidated damages, if any,
may be made by check mailed to the holders of the senior notes at their
respective addresses listed in the register of holders of senior notes; provided
that all payments of principal, premium, interest and Liquidated Damages, if
any, with respect to senior notes the holders of which have given wire transfer
instructions to our company are required to be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof.
Until otherwise designated by our company, our company's office or agency in New
York will be the office of the senior note trustee maintained for such purpose.
The senior notes were issued in denominations of $1,000 and integral multiples
thereof.
Senior Note Guarantees
Our company's payment obligations under the senior notes are fully and
unconditionally, and jointly and severally, guaranteed by the senior note
guarantors. The obligations of each senior note guarantor under its senior note
guarantee will be limited to the maximum amount that would not constitute a
fraudulent conveyance under applicable law. See "Risk Factors--Risks Relating to
the Notes--Your Rights Under the Notes Could Be Limited By Fraudulent Conveyance
Laws."
15
Notwithstanding the foregoing, no Subsidiary of our company will be required to
endorse a senior note guarantee unless such Subsidiary is required to, and does,
simultaneously execute a guarantee of the Senior Credit Facilities.
As of June 30, 2001, the senior note guarantors were: Affinity Mining
Company, Arid Operations Inc., Big Sky Coal Company, Bluegrass Coal Company,
Caballo Coal Company, Charles Coal Company, Cleaton Coal Company, Coal
Properties Corp., Colony Bay Coal Company, Cook Mountain Coal Company,
Cottonwood Land Company, EACC Camps, Inc., Eastern Associated Coal Corp.,
Eastern Royalty Corp., Gallo Finance Company, Gold Fields Chile, S.A., Gold
Fields Mining Corporation, Gold Fields Operating Co.--Ortiz, Grand Eagle Mining,
Inc., Hayden Gulch Terminal, Inc., Highland Mining Co., Hillside Mining Company,
Independence Material Handling Company, Interior Holdings Corp., James River
Coal Terminal Company, Juniper Coal Company, Kayenta Mobile Home Park, Inc.,
Martinka Coal Company, Midco Supply and Equipment Corporation, Mountain View
Coal Company, North Page Coal Corp., Ohio County Coal Company, Patriot Coal
Company L.P., Peabody America, Inc., Peabody Coal Company, Peabody COALSALES
Company, Peabody COALTRADE, Inc., Peabody Coal Company, Peabody Development
Company, Peabody Development Land Holdings, LLC, Peabody Energy Solutions, Inc.,
Peabody Holding Company, Inc., Peabody Natural Gas, LLC, Peabody Natural
Resources Company, Peabody Southwestern Coal Company, Peabody Terminals, Inc.,
Peabody Venezuela Coal Corp., Peabody Western Coal Company, Pine Ridge Coal
Company, Porcupine Productions, LLC, Porcupine Transportation, LLC, Powder River
Coal Company, Rio Escondido Coal Corp., Rivers Edge Mining, Inc., Riverview
Terminal Company, Seneca Coal Company, Sentry Mining Company, Snowberry Land
Company, Sterling Smokeless Coal Company and Thoroughbred, L.L.C.
The senior note indenture provides that no senior note guarantor may
consolidate with or merge with or into (whether or not such senior note
guarantor is the surviving Person), another corporation, Person or entity
whether or not affiliated with such senior note guarantor unless (1) subject to
the provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such senior note guarantor) assumes
all the obligations of such senior note guarantor under a supplemental indenture
in form and substance reasonably satisfactory to the senior note trustee, under
the senior notes, the senior note indenture and the Senior Registration Rights
Agreement; (2) immediately after giving effect to such transaction, no Default
or Event of Default exists; and (3) our company would be permitted by virtue of
our company's pro forma Fixed Charge Coverage Ratio, immediately after giving
effect to such transaction, to incur at least $1.00 of additional Indebtedness
under the Fixed Charge Coverage Ratio test contained in the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock."
The senior note indenture provides that in the event of (a) a sale or
other disposition of all of the assets of any senior note guarantor, by way of
merger, consolidation or otherwise, (b) a sale or other disposition of all of
the capital stock of any senior note guarantor or (c) the designation of a
senior note guarantor as an Unrestricted Subsidiary in accordance with the terms
of the senior note indenture, then such senior note guarantor (in the event of a
sale or other disposition, by way of such a merger, consolidation or otherwise,
of all of the capital stock of such senior note guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all of
the assets of such senior note guarantor) will be released and relieved of any
obligations under its senior note guarantee; provided that the Net Proceeds of
any such sale or other disposition are applied in accordance with the applicable
provisions of the senior note indenture and any such designation of a senior
note guarantor as an Unrestricted Subsidiary complies with all applicable
covenants. See "--Repurchase at the Option of Holders--Asset Sales."
"Senior note guarantors" means each of (i) our company's Domestic
Subsidiaries at the date of the closing of the Acquisition, other than Citizens
Power and the Subsidiaries of Citizens Power at the date of the senior note
indenture and (ii) any other subsidiary that executes a subordinated note
guarantee in accordance with the provisions of the senior note indenture, and
their respective successors and assigns.
Optional Redemption
The senior notes are subject to redemption at any time at the option of
our company, in whole or in part, upon not less than 30 nor more than 60 days'
notice.
Prior to May 15, 2003, the senior notes will be redeemable at a redemption
price equal to 100% of the principal amount thereof plus the applicable Senior
Notes Make Whole Premium, plus, to the extent not included in the Senior Notes
Make Whole Premium, accrued and unpaid interest and Liquidated Damages, if any,
to the date of redemption. For purposes of the foregoing, "Senior Notes Make
Whole Premium" means, with respect to a senior note, an amount equal to the
greater of (a) 104.438% of the outstanding principal amount of such senior note
and (b) the excess of (1) the present value of the remaining interest, premium,
if any, and principal payments due on such senior note as if such senior note
were redeemed on May 15,
16
2003, computed using a discount rate equal to the Treasury Rate plus 50 basis
points, over (2) the outstanding principal amount of such senior note.
On or after May 15, 2003, the senior notes are redeemable at the
redemption prices (expressed as percentages of principal amount) provided below
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the 12-month period beginning on
May 15 of the years indicated below:
Year Percentage
---- ----------
2003 104.438%
2004 102.958%
2005 101.479%
2006 and thereafter 100.000%
Selection and Notice
If less than all of the senior notes are to be redeemed or purchased in an
offer to purchase at any time, selection of senior notes for redemption or
purchase will be made by the senior note trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
senior notes are listed, or, if the senior notes are not so listed, on a pro
rata basis, by lot or by such method as the senior note trustee shall deem fair
and appropriate; provided that no senior notes of $1,000 or less shall be
redeemed in part. Notices of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each holder of
senior notes to be redeemed at its registered address. Notices of redemption may
not be conditional. If any senior note is to be redeemed in part only, the
notice of redemption that relates to such senior note shall state the portion of
the principal amount thereof to be redeemed. A new senior note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
holder thereof upon cancellation of the original senior note. Senior notes
called for redemption become due on the date fixed for redemption. On and after
the redemption date, interest ceases to accrue on senior notes or portions of
them called for redemption.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each holder of senior notes
will have the right to require our company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such holder's senior notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within ten days following any
Change of Control, our company will mail a notice to each holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase senior notes on the date specified in such notice, which date
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"), under the procedures
required by the senior note indenture and described in such notice. Our company
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the senior notes
as a result of a Change of Control.
On the Change of Control Payment Date, our company will, to the extent
lawful, (1) accept for payment all senior notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all senior
notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the senior note trustee the senior notes so accepted together with an
Officers' Certificate stating the aggregate principal amount of senior notes or
portions thereof being purchased by our company. The Paying Agent will promptly
mail to each holder of senior notes so tendered the Change of Control Payment
for such senior notes, and the senior note trustee will promptly authenticate
and mail (or cause to be transferred by book entry) to each holder a new senior
note equal in principal amount to any unpurchased portion of the senior notes
surrendered, if any; provided that each such new senior note will be in a
principal amount of $1,000 or an integral multiple thereof. The senior note
indenture will provide that, prior to complying with the provisions of this
covenant, but in any event within 90 days following a Change of Control, our
company will either repay all outstanding Senior Debt other than the senior
notes or obtain the requisite consents, if any, under all agreements governing
outstanding Senior Debt other than the senior notes to permit the repurchase of
senior notes required by this covenant. The company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
17
The Change of Control provisions described above will be applicable
whether or not any other provisions of the senior note indenture are applicable.
Except as described above with respect to a Change of Control, the senior note
indenture does not contain provisions that permit the holders of the senior
notes to require that our company repurchase or redeem the senior notes in the
event of a takeover, recapitalization or similar transaction.
Our company's other senior indebtedness contains prohibitions on certain
events that would constitute a Change of Control. In addition, the exercise by
the holders of senior notes of their right to require our company to repurchase
the senior notes could cause a default under such other senior indebtedness,
even if the Change of Control itself does not, due to the financial effect of
such repurchases on our company. Finally, our company's ability to pay cash to
the holders of senior notes upon a repurchase may be limited by our company's
then existing financial resources. See "Risk Factors--Risks Relating to the
Notes--Our Ability to Offer to Purchase Your Notes in the Event of a Change of
Control May Be Limited."
The Senior Credit Facilities currently prohibit our company from
purchasing any senior notes or senior subordinated notes, and also provide that
certain change of control events with respect to our company would constitute a
default thereunder. Any future credit agreements or other agreements relating to
Senior Debt to which our company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when our company is prohibited from purchasing senior notes, our company could
seek the consent of its lenders to the purchase of senior notes or could attempt
to refinance the borrowings that contain such prohibition. If our company does
not obtain such a consent or repay such borrowings, our company will remain
prohibited from purchasing senior notes. In such case, our company's failure to
purchase tendered senior notes would constitute an Event of Default under the
senior note indenture which would, in turn, constitute a default under the
Senior Credit Facilities.
Our company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements contained
in the senior note indenture applicable to a Change of Control Offer made by our
company and purchases all senior notes validly tendered and not withdrawn under
such Change of Control Offer or if our company exercises its option to purchase
the senior notes.
"Change of Control" means the occurrence of any of the following: (1) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of our company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than a Principal or a Related Party of a Principal (as
defined below), (2) the adoption of a plan relating to the liquidation or
dissolution of our company, (3) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of our company (measured by voting power rather than
number of shares) or (4) the first day on which a majority of the members of the
Board of Directors of our company are not Continuing Directors.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of our company and its Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of senior notes to
require our company to repurchase such senior notes as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of our company and its Subsidiaries taken as a whole to another Person or group
may be uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of our company who (1) was a member of such Board of
Directors on the date of the closing of the Acquisition or (2) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Principals" means Lehman Brothers Merchant Banking Partners II L.P., any
of its respective Affiliates and executive officers of our company as of the
date of the closing of the Acquisition.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more
18
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (A).
Asset Sales
The senior note indenture provides that our company will not, and will not
permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless
(1) our company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value as determined in good faith by our company (evidenced by a resolution of
the Board of Directors contained in an Officers' Certificate delivered to the
senior note trustee with respect to any Asset Sale determined to have a value
greater that $25.0 million) of the assets or Equity Interests issued or sold or
otherwise disposed of and (2) at least 75% of the consideration therefor
received by our company or such Subsidiary is in the form of cash, Cash
Equivalents or Marketable Securities; provided that the following amounts shall
be deemed to be cash: (w) any liabilities (as shown on our company's or such
Restricted Subsidiary's most recent balance sheet), of our company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the senior notes or any guarantee thereof)
that are assumed by the transferee of any such assets under a customary novation
agreement that releases our company or such Restricted Subsidiary from further
liability, (x) any securities, notes or other obligations received by our
company or any such Restricted Subsidiary from such transferee that are
converted by our company or such Restricted Subsidiary into cash within 180 days
following the closing of such Asset Sale (to the extent of the cash received),
(y) any Designated Noncash Consideration received by our company or any of its
Restricted Subsidiaries in such Asset Sale; provided that the aggregate fair
market value (as determined above) of such Designated Noncash Consideration,
taken together with the fair market value at the time of receipt of all other
Designated Noncash Consideration received pursuant to this clause (y) less the
amount of Net Proceeds previously realized in cash from prior Designated Noncash
Consideration is less than 5% of Total Assets at the time of the receipt of such
Designated Noncash Consideration (with the fair market value of each item of
Designated Noncash Consideration being measured at the time received and without
giving effect to subsequent changes in value) and (z) Additional Assets received
in an exchange of assets transaction.
Within 360 days after the receipt of any cash Net Proceeds from an Asset
Sale, our company or such Restricted Subsidiary, at its option, may apply such
cash Net Proceeds, at its option, (a) to repay Indebtedness of our company or
any Restricted Subsidiary that is not subordinated in right of payment to
Indebtedness under a Credit Facility, (b) to the Acquisition of a majority of
the assets of, or a majority of the Voting Stock of, another Permitted Business,
the making of a capital expenditure or the Acquisition of other assets or
Investments that are used or useful in a Permitted Business or (c) to apply the
cash Net Proceeds from such Asset Sale to an Investment in Additional Assets.
Any cash Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15.0
million, our company will be required to make an offer to all holders of senior
notes and all holders of other Indebtedness that ranks equally with the senior
notes containing provisions similar to those contained in the senior note
indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount
of senior notes and such other Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures
contained in the senior note indenture and such other Indebtedness. To the
extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, our company may use such Excess Proceeds for any purpose not otherwise
prohibited by the senior note indenture. If the aggregate principal amount of
senior notes and such other Indebtedness tendered into such Asset Sale Offer
surrendered by holders thereof exceeds the amount of Excess Proceeds, the senior
note trustee shall select the senior notes and such other Indebtedness to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
Covenants
Restricted Payments
The senior note indenture provides that our company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly: (1)
declare or pay any dividend or make any other payment or distribution on account
of our company's or any of its Restricted Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving our company or any of its Restricted Subsidiaries) or to
the direct or indirect holders of our company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
our company); (2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving our company) any Equity Interests of our company or any direct or
indirect parent of our company; (3) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to
19
the senior notes or any senior note guarantee, except a payment of interest or
principal at Stated Maturity or Indebtedness permitted under clause (8) of the
covenant described under "--Incurrence of Indebtedness and Issuance of Preferred
Stock;" or (4) make any Restricted Investment (all such payments and other
actions contained in clauses (1) through (4) above being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) our company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have
been permitted to incur at least $1.00 of additional Indebtedness under
the Fixed Charge Coverage Ratio test described in the first paragraph of
the covenant described below under caption "Incurrence of Indebtedness and
Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by our company and its Subsidiaries
after the date of the closing of the Acquisition (excluding Restricted
Payments permitted by clauses (2), (3), (4), (5), (9), (10) and (12) of
the next succeeding paragraph), is less than the sum, without duplication,
of (1) 50% of the Consolidated Net Income of our company for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the date of the closing of the Acquisition to the
end of our company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (2) 100% of the aggregate net cash proceeds or
the fair market value of property other than cash received by our company
since the date of the closing of the Acquisition as a contribution to its
common equity capital or from the issue or sale of Equity Interests of our
company (other than Disqualified Stock) or from the issue or sale of
Disqualified Stock or debt securities of our company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
our company), plus (3) to the extent that either any Existing Citizens
Power Investment or any Restricted Investment that reduced the amount
available for Restricted Payments under this clause (c) is sold for cash
or otherwise liquidated or repaid for cash or any dividend or payment is
received by our company or a Restricted Subsidiary after the date of the
closing of the Acquisition in respect of such Investment, 100% of the
amount of Net Proceeds or dividends or payments (including the fair market
value of property) received in connection therewith, up to the amount of
the Existing Citizens Power Investment on the date of the closing of the
Acquisition or the Restricted Investment that reduced this clause (c), as
the case may be, and thereafter 50% of the amount of Net Proceeds or
dividends or payments (including the fair market value of property)
received in connection therewith (except that the amount of dividends or
payments received in respect of payments of Obligations in respect of such
Investments, such as taxes, shall not increase the amounts under this
clause (c)), plus (4) to the extent that any Unrestricted Subsidiary of
our company is redesignated as a Restricted Subsidiary after the date of
the closing of the Acquisition, 100% of the fair market value of our
company's Investment in such Subsidiary as of the date of such
redesignation up to the amount of the Restricted Investments made in such
Subsidiary that reduced this clause (c) and 50% of the excess of the fair
market value of our company's Investment in such Subsidiary as of the date
of such redesignation over (i) the amount of the Restricted Investment
that reduced this clause (c) and (ii) any amounts that increased the
amount available as a Permitted Investment; provided, further, that if
Citizens Power or any of its Subsidiaries is designated as a Restricted
Subsidiary, the amount of the fair market value of the Investment therein
on the date of the senior note indenture shall also be credited to this
clause (c); provided, further, that any amounts that increase this clause
(c) shall not duplicatively increase amounts available as Permitted
Investments.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the senior note indenture;
(2) the redemption, repurchase, retirement, defeasance or other
Acquisition of any subordinated Indebtedness or Equity Interests of our
company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of
our company) of, other Equity Interests of our company (other than any
Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other Acquisition shall be excluded from clause
(c)(2) of the preceding paragraph;
20
(3) the defeasance, redemption, repurchase or other Acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(4) dividends or distributions by a Restricted Subsidiary of our
company so long as, in the case of any dividend or distribution payable on
or in respect of any class or series of securities issued by a Restricted
Subsidiary, our company or a Restricted Subsidiary receives at least its
pro rata share of such dividend or distribution in accordance with its
Equity Interests in such class or series of securities;
(5) Investments in Unrestricted Subsidiaries having an aggregate
fair market value not to exceed the amount, at the time of such
Investment, substantially concurrently contributed in cash or Cash
Equivalents to the common equity capital of our company after the date of
the closing of the Acquisition; provided that any such amount contributed
shall be excluded from the calculation made pursuant to clause (c) above;
(6) the payment of dividends on our company's common stock,
following the first public offering of our company's common stock after
the date of the closing of the Acquisition, of up to 6% per annum of the
net proceeds received by our company in such public offering, other than
public offerings with respect to our company's common stock registered on
Form S-8;
(7) the repurchase, redemption or other Acquisition or retirement
for value of any Equity Interests of our company or any Restricted
Subsidiary of our company held by any present or former employee or
director of our company (or any of its Restricted Subsidiaries) under any
management equity subscription agreement or stock option agreement or any
other management or employee benefit plan in effect as of the date of the
closing of the Acquisition; provided that (A) the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests shall
not exceed $2.0 million in any 12-month period (with unused amounts in any
calendar year being carried over to succeeding calendar years subject to a
maximum (without giving effect to the following proviso) of $5.0 million
in any calendar year); provided further that such amount in any calendar
year may be increased by an amount not to exceed (x) the cash proceeds
from the sale of Equity Interests of our company or a Restricted
Subsidiary to members of management and directors of our company and its
Subsidiaries that occurs after the date of the closing of the Acquisition,
plus (y) the cash proceeds of key-man life insurance policies received by
our company and its Restricted Subsidiaries after the date of the closing
of the Acquisition, less (z) the amount of any Restricted Payments
previously made pursuant to clauses (x) and (y) of this subparagraph (7);
and, provided further, that cancellation of Indebtedness owing to our
company from members of management of our company or any of its Restricted
Subsidiaries in connection with a repurchase of Equity Interests of our
company or a Restricted Subsidiary will not be deemed to constitute a
Restricted Payment for purposes of this covenant or any other provision of
the senior note indenture and (B) no Default or Event of Default shall
have occurred and be continuing immediately after such transaction;
(8) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise
price of such options;
(9) the repurchase, redemption or other Acquisition or retirement
for value of the senior subordinated notes under the provisions described
under the caption "Description of the Senior Subordinated Notes--Optional
Redemption;" provided that the amount of any Equity Offering used to
effect such a repurchase, redemption or other Acquisition or retirement
for value shall be excluded from the calculation made pursuant to clause
(c) above;
(10) the repurchase, redemption or other Acquisition or retirement
for value of the senior subordinated notes under the provisions described
under the caption "Description of the Senior Subordinated
Notes--Repurchase at the Option of Holders--Change of Control" and
"Description of the Senior Subordinated Notes--Repurchase at the Option of
Holders--Asset Sales;" provided that, as of the date of such repurchase,
redemption or other Acquisition or retirement for value, no Default or
Event of Default shall have occurred and be continuing or, with the
passage of time, would occur as a consequence thereof;
(11) the repurchase, redemption or other Acquisition or retirement
for value of the senior subordinated notes under the provisions described
under the caption "Description of the Senior Subordinated Notes--Escrow of
Proceeds; Special Mandatory Redemption of Senior Subordinated Notes;"
provided that the amount of any such repurchase, redemption, Acquisition
or retirement shall be excluded from the calculation made pursuant to
clause (c) above; and
(12) other Restricted Payments not otherwise prohibited by this
covenant in an aggregate amount not to exceed $25.0 million under this
clause (12).
21
All of our company's Subsidiaries other than Citizens Power and its
Subsidiaries are Restricted Subsidiaries. The Board of Directors may designate
any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation
would not cause a Default. For purposes of making such determination, all
outstanding Investments by our company and its Restricted Subsidiaries (except
to the extent repaid in cash) in the subsidiary so designated will be deemed to
be Restricted Payments at the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
covenant. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the fair market value of such Investments at
the time of such designation. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
If, at any time, any Unrestricted Subsidiary would fail to meet the
requirements in the definition of "Unrestricted Subsidiary" as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the senior note indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of our company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "Incurrence of Indebtedness
and Issuance of Preferred Stock," our company shall be in default of such
covenant). The Board of Directors of our company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of our company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (1) such Indebtedness
is permitted under the covenant described under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period, and (2) no Default or Event of Default would be in existence
following such designation.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by our company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any noncash Restricted Payment or any adjustment made pursuant
to paragraph (c) of this covenant shall be determined by the Board of Directors
whose resolution with respect thereto shall be delivered to the senior note
trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $25.0 million. Not later than the date of making any
Restricted Payment, our company shall deliver to the senior note trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed.
If any Restricted Investment is sold or otherwise liquidated or repaid or
any dividend or payment is received by our company or a Restricted Subsidiary
and such amounts may be credited to clause (c) above, then such amounts will be
credited only to the extent of amounts not otherwise included in Consolidated
Net Income and that do not otherwise increase the amount available as a
Permitted Investment.
Incurrence of Indebtedness and Issuance of Preferred Stock
The senior note indenture provides that our company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that our company will not issue any
Disqualified Stock and will not permit any of its Subsidiaries to issue any
shares of preferred stock; provided, however, that our company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and
our company's Restricted Subsidiaries may incur Indebtedness or issue
Disqualified Stock or preferred stock if the Fixed Charge Coverage Ratio for our
company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 2.0 to 1.0, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock or
preferred stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by our company of term Indebtedness under Credit
Facilities (and the guarantee thereof by the senior note guarantors);
provided that the aggregate principal amount of all term Indebtedness
outstanding under this clause (1) after giving effect to such incurrence
does not exceed an amount equal to $920.0 million;
22
(2) the incurrence by our company of revolving credit Indebtedness
and letters of credit (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of our company
and its Restricted Subsidiaries thereunder) under Credit Facilities (and
the guarantee thereof by the senior note guarantors); provided that the
aggregate principal amount of all revolving credit Indebtedness
outstanding under this clause (ii) after giving effect to such incurrence
does not exceed an amount equal to $480.0 million;
(3) the incurrence by our company and its Restricted Subsidiaries of
the Existing Indebtedness;
(4) the incurrence by our company, the senior note guarantors and
the senior subordinated note guarantors of Indebtedness represented by the
senior notes, the senior subordinated notes, the senior note guarantees
and the senior subordinated guarantees limited in aggregate principal
amount, without duplication, to amounts outstanding under the senior note
indenture and the senior subordinated note indenture as of their
respective dates;
(5) (A) the guarantee by our company or any of the senior note
guarantors of Indebtedness of our company or a Restricted Subsidiary of
our company or (B) the incurrence of Indebtedness of a Restricted
Subsidiary to the extent that such Indebtedness is supported by a letter
of credit, in each case that was permitted to be incurred by another
provision of this covenant;
(6) the incurrence by our company or any of its Restricted
Subsidiaries of Indebtedness (including Capital Lease Obligations) to
finance the Acquisition (including by direct purchase, by lease or
indirectly by the Acquisition of the capital stock of a Person that
becomes a Restricted Subsidiary as a result of such Acquisition) or
improvement of property (real or personal) in an aggregate principal
amount which, when aggregated with the principal amount of all other
Indebtedness then outstanding pursuant to this clause (6) and including
all Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (6), does not
exceed an amount equal to 5% of Total Assets at the time of such
incurrence;
(7) the incurrence by our company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted by
the senior note indenture to be incurred under the first paragraph hereof
or clauses (3), (4) or (7) of this paragraph;
(8) the incurrence by our company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among our company and
any of its Restricted Subsidiaries; provided, however, that (1) if our
company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the senior subordinated notes and (2)(A) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than our company or a
Restricted Subsidiary thereof and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either our company or a
Restricted Subsidiary thereof shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by our company or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause (8);
(9) the incurrence by our company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred in the ordinary
course of business for the purpose of risk management and not for the
purpose of speculation;
(10) the incurrence by our company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of our company that was not permitted by this clause (10), and
the issuance of preferred stock by Unrestricted Subsidiaries;
(11) the incurrence of Indebtedness solely in respect of
performance, surety and similar bonds or completion or performance
guarantees (including, without limitation, performance guarantees under
coal supply agreements or equipment leases), to the extent that such
incurrence does not result in the incurrence of any obligation for the
payment of borrowed money to others;
(12) the incurrence of Indebtedness arising from agreements of our
company or a Restricted Subsidiary providing for indemnification,
adjustment of purchase price or similar obligations, in each case,
incurred or assumed in connection with the disposition of any business,
assets or a Subsidiary; provided, however, that (1) such Indebtedness is
not reflected on the balance sheet of our company or any Restricted
Subsidiary (contingent obligations referred to in a footnote to financial
statements and not otherwise reflected on the balance sheet will not
23
be deemed to be reflected on such balance sheet for purposes of this
clause (1)) and (2) the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds including noncash
proceeds (the fair market value of such noncash proceeds being measured at
the time received and without giving effect to any subsequent changes in
value) actually received by our company and its Restricted Subsidiaries in
connection with such disposition;
(13) the guarantee by our company or any of the senior note
guarantors of additional Indebtedness relating to Black Beauty Coal
Company not to exceed $50.0 million in aggregate principal amount
outstanding at any one time under this clause (13);
(14) the incurrence of Indebtedness relating to the Bengalla Joint
Venture or the Warkworth Associates Joint Venture in an aggregate amount
not to exceed $100.0 million in aggregate principal amount outstanding at
any one time under this clause (14); and
(15) the incurrence by our company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (15), not to
exceed $250.0 million.
The senior note indenture also provides that our company will not incur,
and will not permit its Restricted Subsidiaries to incur, any Indebtedness
(including Permitted Debt) that is contractually subordinated in right of
payment to any other Indebtedness of our company or such Restricted Subsidiary
unless such Indebtedness is also contractually subordinated in right of payment
to the senior notes, or the senior note guarantees, as the case may be, on
substantially identical terms; provided, however, that no Indebtedness of our
company or any Restricted Subsidiary shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of our company or any
Restricted Subsidiary solely by virtue of being unsecured.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (15) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, our
company shall, in its sole discretion, classify or reclassify such item of
Indebtedness in any manner that complies with this covenant. Accrual of
interest, accretion or amortization of original issue discount, the payment of
interest on any Indebtedness in the form of additional Indebtedness with the
same terms, and the payment of dividends on Disqualified Stock in the form of
additional shares of the same class of Disqualified Stock will not be deemed to
be an incurrence of Indebtedness or an issuance of Disqualified Stock for
purposes of this covenant; provided, in each such case, that the amount thereof
is included in Fixed Charges of our company as accrued.
Liens
The senior note indenture provides that our company will not and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or otherwise cause or suffer to exist or become effective any Lien
of any kind (other than Permitted Liens) upon any of their property or assets,
now owned or hereafter acquired, unless all payments due under the senior note
indenture and the senior notes are secured on an equal and ratable basis with
the obligations so secured until such time as such obligations are no longer
secured by a Lien.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The senior note indenture provides that our company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary that is not a senior
note guarantor to (1)(a) pay dividends or make any other distributions to our
company or any of its Restricted Subsidiaries (i) on its capital stock or (ii)
with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to our company or any of its
Restricted Subsidiaries, (2) make loans or advances to our company or any of its
Restricted Subsidiaries or (3) transfer any of its properties or assets to our
company or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the date of the closing of
the Acquisition, (b) the Senior Credit Facilities as in effect as of the date of
the closing of the Acquisition, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacement or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other payment
restrictions than those contained in the Senior Credit Facilities as in effect
on the date of the closing of the Acquisition, (c) the senior note indenture,
the senior subordinated note indenture, the senior notes and the senior
subordinated notes,
24
(d) applicable law or any applicable rule, regulation or order, (e) any
instrument governing Indebtedness or capital stock of a Person acquired by our
company or any of its Restricted Subsidiaries as in effect at the time of such
Acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such Acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the senior note indenture to be incurred, (f) customary
non-assignment provisions in leases and other agreements entered into in the
ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (3) above on the property
so acquired, (h) any agreement for the sale of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale, (i)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced, (j) secured Indebtedness otherwise permitted
to be incurred under the provisions of the covenant described above under the
caption "--Liens" that limits the right of the debtor to dispose of the assets
securing such Indebtedness, (k) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business, (l) restrictions on
cash or other deposits or net worth imposed by customers or lessors under
contracts or leases entered into in the ordinary course of business and (m) any
encumbrances or restrictions imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in clauses
(a) through (l) above, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are, in the good faith judgment of our company's Board of
Directors, not materially more restrictive in the aggregate with respect to such
dividend and other payment restrictions than those (considered as a whole)
contained in the dividend or other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding, replacement
or refinancing.
Merger, Consolidation, or Sale of Assets
The senior note indenture provides that our company may not consolidate or
merge with or into (whether or not our company is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless (1) our company is
the surviving corporation or the entity or the Person formed by or surviving any
such consolidation or merger (if other than our company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (2) the entity or Person formed
by or surviving any such consolidation or merger (if other than our company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of our
company under the Senior Registration Rights Agreement, the senior notes and the
senior note indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the senior note trustee; (3) immediately after such transaction
no Default or Event of Default exists; and (4) except in the case of a merger of
our company with or into a Wholly Owned Restricted Subsidiary of our company,
immediately after giving pro forma effect to such transaction, as if such
transaction had occurred at the beginning of the applicable four-quarter period,
(A) the entity surviving such consolidation or merger would be permitted to
incur at least $1.00 of additional Indebtedness under the Fixed Charge Coverage
Ratio test contained in the first paragraph of the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"
or (B) the Fixed Charge Coverage Ratio for our company or the entity or Person
formed by or surviving any such consolidation or merger (if other than our
company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made would, immediately after giving pro forma
effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, not be less than such Fixed Charge Coverage
Ratio for our company and its Restricted Subsidiaries immediately prior to such
transaction. The senior note indenture also provides that our company may not,
directly or indirectly, lease all or substantially all of its properties or
assets, in one or more related transactions, to any other Person. The provisions
of this covenant will not be applicable to a sale, assignment, transfer,
conveyance or other disposition of assets between or among our company and its
Restricted Subsidiaries.
Notwithstanding the foregoing clause (4), (1) any Restricted Subsidiary
may consolidate with, merge into or transfer all or part of its properties and
assets to our company and (2) our company may merge with an Affiliate that has
no significant assets or liabilities and was formed solely for the purpose of
changing the jurisdiction of organization of our company in another State of the
United States or the form of organization of our company so long as the amount
of Indebtedness of our company and its Restricted Subsidiaries is not increased
thereby and provided that the successor assumes all the obligations of our
company under the Senior Registration Rights Agreement, the senior notes and the
senior note indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the senior note trustee.
25
Transactions with Affiliates
The senior note indenture provides that our company will not, and will not
permit any of its Restricted Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction") involving aggregate payments or consideration in excess of $5.0
million, unless (1) such Affiliate Transaction is on terms that are materially
no less favorable to our company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by our company
or such Restricted Subsidiary with an unrelated Person and (2) our company
delivers to the senior note trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $10.0 million, a resolution of the Board of Directors
contained in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (1) above and that such Affiliate Transaction has been
approved by a majority of the members of the Board of Directors and (b) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $25.0 million, an opinion as to
the fairness to the holders of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
national standing.
Notwithstanding the foregoing, the following items shall not be deemed to
be Affiliate Transactions: (1) any employment agreement or other compensation
plan or arrangement for employees entered into by our company or any of its
Restricted Subsidiaries in the ordinary course of business and consistent with
the past practice of our company or such Restricted Subsidiary, (2) transactions
between or among our company and/or its Restricted Subsidiaries, (3) payment of
reasonable fees to officers, directors, employees or consultants of our company,
(4) Restricted Payments that are permitted by, and Investments that are not
prohibited by, the provisions of the senior note indenture described above under
the caption "--Restricted Payments," (5) indemnification payments made to
officers, directors and employees of our company or any Restricted Subsidiary
under charter, bylaw, statutory or contractual provisions; (6) the payment of
customary annual management, consulting and advisory fees and related expenses
to Lehman Merchant Bank and its Affiliates; (7) payments by our company or any
of its Restricted Subsidiaries to Lehman Merchant Bank and its Affiliates made
for any financial advisory, financing, underwriting or placement services or in
respect of other investment banking activities, including, without limitation,
in connection with Acquisitions or divestitures which payments are approved by a
majority of the Board of Directors of our company in good faith; (8) the
existence of, or the performance by our company or any of its Restricted
Subsidiaries of its obligations under the terms of, any stockholders' agreement
(including any registration rights agreement or purchase agreement related
thereto) to which it is a party as of the date of the closing of the Acquisition
and any similar agreements which it may enter into thereafter; provided,
however, that the existence of, or the performance by our company or any of its
Restricted Subsidiaries of obligations under any future amendment to any such
existing agreement or under any similar agreement entered into after the date of
the closing of the Acquisition shall only be permitted by this clause (8) to the
extent that the terms of any such amendment or new agreement are not otherwise
disadvantageous to the holders in any material respect; (9) transactions under
the terms of the Transaction Documents in effect on the date of the closing of
the Acquisition; (10) transactions with Unrestricted Subsidiaries, customers,
clients, suppliers, joint venture partners or purchasers or sellers of goods or
services, in each case in the ordinary course of business (including, without
limitation, under joint venture agreements) and otherwise in compliance with the
terms of the senior note indenture which are, in the aggregate (taking into
account all the costs and benefits associated with such transactions),
materially no less favorable to our company or its Restricted Subsidiaries than
those that would have been obtained in a comparable transaction by our company
or such Restricted Subsidiary with an unrelated Person, in the reasonable
determination of the Board of Directors of our company or the senior management
thereof, or are on terms at least as favorable as might reasonably have been
obtained at such time from an unaffiliated party; (11) guarantees of performance
by our company and its Restricted Subsidiaries of Unrestricted Subsidiaries in
the ordinary course of business, except for guarantees of Obligations in respect
of borrowed money; and (12) pledges of Equity Interests of Unrestricted
Subsidiaries for the benefit of lenders of Unrestricted Subsidiaries.
Additional Senior Note Guarantees
The senior note indenture provides that if our company or any of its
Domestic Subsidiaries shall acquire or create another Domestic Subsidiary after
the date of the senior note indenture and such Domestic Subsidiary provides a
guarantee of the Senior Credit Facilities, then such newly acquired or created
Domestic Subsidiary shall execute a supplemental indenture in form and substance
satisfactory to the senior note trustee providing that such Domestic Subsidiary
shall become a senior note guarantor under the senior note indenture, provided,
however, this covenant shall not apply to any Domestic Subsidiary that has been
properly designated as an Unrestricted Subsidiary in accordance with the senior
note indenture for so long as it continues to constitute an Unrestricted
Subsidiary.
26
Business Activities
Our company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to our company and its Restricted Subsidiaries taken as a
whole.
Payments for Consent
The senior note indenture provides that neither our company nor any of its
Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any holder
of any senior notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of the senior note indenture or the senior
notes unless such consideration is offered to be paid or is paid to all holders
of the senior notes that consent, waive or agree to amend in the time frame
provided in the solicitation documents relating to such consent, waiver or
agreement.
Reports
The senior note indenture provides that, whether or not required by the
rules and regulations of the Commission, so long as any senior notes are
outstanding, our company will furnish to the holders of senior notes (1) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if our company
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that describes the
financial condition and results of operations of our company and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of our company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of our company) and, with respect to the annual
information only, a report thereon by our company's certified independent
accountants and (2) all current reports that would be required to be filed with
the Commission on Form 8-K if our company were required to file such reports, in
each case within the time periods specified in the Commission's rules and
regulations. In addition, following the consummation of the exchange offer
contemplated by the Senior Registration Rights Agreement, whether or not
required by the rules and regulations of the Commission, our company will file a
copy of all such information and reports with the Commission for public
availability within the time periods specified in the Commission's rules and
regulations (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, our company and the senior note guarantors have agreed
that, for so long as any senior notes remain outstanding, they will furnish to
the holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered under Rule 144A(d)(4) under
the Securities Act.
Events of Default and Remedies
The senior note indenture provides that each of the following constitutes
an Event of Default: (1) default for 30 days in the payment when due of interest
on, or Liquidated Damages, if any, with respect to, the senior notes; (2)
default in payment when due of the principal of or premium, if any, on the
senior notes; (3) failure by our company or any of its Subsidiaries to make the
offer required or to purchase any of the senior notes as required under the
provisions described under the captions "--Change of Control," or "--Asset
Sales;" (4) failure by our company or any of its Subsidiaries for 30 days after
notice to comply with the provisions of the covenants entitled "--Restricted
Payments" or "--Incurrence of Indebtedness and Issuance of Preferred Stock;" or
failure by our company or any of its Subsidiaries for 60 days after notice to
comply with any of its other agreements in the senior note indenture or the
senior notes; (5) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by our company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by our company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date of the senior note indenture, which default results in
the acceleration of such Indebtedness prior to its express maturity and the
principal amount of any such Indebtedness aggregates $50.0 million or more; (6)
failure by our company or any of its Restricted Subsidiaries or any group of
Restricted Subsidiaries that, taken as a whole, would be a Significant
Subsidiary to pay final judgments aggregating in excess of $50.0 million, which
judgments are not paid, discharged or stayed for a period of 60 days; (7) except
as permitted by the senior note indenture, any senior note guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any senior note guarantor, or
any Person acting on behalf of any senior note guarantor, shall deny or
disaffirm its obligations under its senior note guarantee; (8) certain events of
bankruptcy or insolvency with respect to our company, any of its Significant
Subsidiaries that are Restricted Subsidiaries or any group of Restricted
Subsidiaries that, taken as a whole, would be a Significant Subsidiary; and (9)
any
27
failure of our company to deposit the required amounts into the Escrow Account
under the Escrow Letter or any failure of the proceeds of the Escrow Account to
be applied as required under the Escrow Letter.
If any Event of Default occurs and is continuing, the senior note trustee
or the holders of at least 25% in principal amount of the then outstanding
senior notes may declare all the senior notes to be due and payable immediately;
provided, that so long as any Indebtedness permitted to be incurred pursuant to
the Senior Credit Facilities shall be outstanding, such acceleration shall not
be effective until the earlier of (1) an acceleration of any such Indebtedness
under the Senior Credit Facilities or (2) five business days after receipt by
our company of written notice of such acceleration of the senior notes.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to our company, any
Significant Subsidiary that is a Restricted Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding senior notes will become due and payable without
further action or notice. Holders of the senior notes may not enforce the senior
note indenture or the senior notes except as provided in the senior note
indenture. Subject to certain limitations, holders of a majority in principal
amount of the then outstanding senior notes may direct the senior note trustee
in its exercise of any trust or power. The senior note trustee may withhold from
holders of the senior notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of our company with
the intention of avoiding payment of the premium that our company would have had
to pay if our company then had elected to redeem the senior notes under the
optional redemption provisions of the senior note indenture, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the senior notes. If an Event of
Default occurs prior to May 15, 2003 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of our company with the intention
of avoiding paying the premium upon redemption of the senior notes prior to May
15, 2003, then the premium specified in the senior note indenture shall also
become immediately due and payable to the extent permitted by law upon the
acceleration of the senior notes.
The holders of a majority in aggregate principal amount of the senior
notes then outstanding by notice to the senior note trustee may on behalf of the
holders of all of the senior notes waive any existing Default or Event of
Default and its consequences under the senior note indenture except a continuing
Default or Event of Default in the payment of interest on, or the principal of,
the senior notes.
Our company is required to deliver to the senior note trustee annually a
statement regarding compliance with the senior note indenture, and our company
is required upon becoming aware of any Default or Event of Default, to deliver
to the senior note trustee a statement specifying such Default or Event of
Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of our company
or any Person controlling such Person, as such, shall have any liability for any
obligations of our company under the senior notes, the subordinated note
guarantors, the senior note indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each holder of senior notes
by accepting a senior note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the senior notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
Legal Defeasance and Covenant Defeasance
Our company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding senior notes ("Legal
Defeasance") except for (1) the rights of holders of outstanding senior notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages, if any, on such senior notes when such payments are due
from the trust referred to below, (2) our company's obligations with respect to
the senior notes concerning issuing temporary senior notes, registration of
senior notes, mutilated, destroyed, lost or stolen senior notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (3) the rights, powers, trusts, duties and immunities of the
senior note trustee, and our company's obligations in connection therewith and
(4) the Legal Defeasance provisions of the senior note indenture. In addition,
our company may, at its option and at any time, elect to have the obligations of
our company released with respect to certain covenants that are described in the
senior note indenture ("Covenant Defeasance") and thereafter any omission to
comply with such obligations shall not constitute a Default or Event of Default
with respect to the senior notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the senior notes.
28
In order to exercise either Legal Defeasance or Covenant Defeasance, (1)
our company must irrevocably deposit with the senior note trustee, in trust, for
the benefit of the holders of the senior notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest and Liquidated Damages, if any, on the outstanding senior notes on the
stated maturity or on the applicable redemption date, as the case may be, and
our company must specify whether the senior notes are being defeased to maturity
or to a particular redemption date; (2) in the case of Legal Defeasance, our
company shall have delivered to the senior note trustee an opinion of counsel in
the United States reasonably acceptable to the senior note trustee confirming
that (A) our company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the senior note
indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the holders of the outstanding senior notes will not recognize
income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (3) in the case of Covenant Defeasance, our company
shall have delivered to the senior note trustee an opinion of counsel in the
United States reasonably acceptable to the senior note trustee confirming that
the holders of the outstanding senior notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant Defeasance
had not occurred; (4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the effective date of such defeasance (5) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under any material agreement or instrument (other
than the senior note indenture) to which our company or any of its Subsidiaries
is a party or by which our company or any of its Subsidiaries is bound; (6) our
company must have delivered to the senior note trustee, at or prior to the
effective date of such defeasance, an opinion of counsel to the effect that at
the effective date of such defeasance, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (7) our company must deliver to the
senior note trustee an Officers' Certificate stating that the deposit was not
made by our company with the intent of preferring the holders of senior notes
over the other creditors of our company with the intent of defeating, hindering,
delaying or defrauding creditors of our company or others; and (8) our company
must deliver to the senior note trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
Transfer and Exchange
A holder may transfer or exchange senior notes in accordance with the
senior note indenture. The Registrar and the senior note trustee may require a
holder, among other things, to furnish appropriate endorsements and transfer
documents and our company may require a holder to pay any taxes and fees
required by law or permitted by the senior note indenture. Our company is not
required to transfer or exchange any senior note selected for redemption. Also,
our company is not required to transfer or exchange any senior note for a period
of 15 days before a selection of senior notes to be redeemed.
The registered holder of a senior note will be treated as the owner of it
for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the senior note
indenture or the senior notes may be amended or supplemented with the consent of
the holders of at least a majority in principal amount of the senior notes then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, senior notes), and any
existing default or compliance with any provision of the senior note indenture
or the senior notes may be waived with the consent of the holders of a majority
in principal amount of the then outstanding senior notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, senior notes).
Without the consent of each holder affected, an amendment or waiver may
not (with respect to any senior notes held by a non-consenting holder): (1)
reduce the principal amount of senior notes whose holders must consent to an
amendment, supplement or waiver, (2) reduce the principal of or change the fixed
maturity of any senior note or alter the provisions with respect to the
redemption of the senior notes (other than provisions relating to the covenants
described above under the caption "--Repurchase at the Option of Holders"), (3)
reduce the rate of or change the time for payment of interest on any senior
note, (4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the senior notes (except a rescission of
acceleration of the senior notes by the holders of at least a majority in
aggregate principal
29
amount of the senior notes and a waiver of the payment default that resulted
from such acceleration), (5) make any senior note payable in money other than
that stated in the senior notes, (6) make any change in the provisions of the
senior note indenture relating to waivers of past Defaults or the rights of
holders of senior notes to receive payments of principal of or premium, if any,
or interest on the senior notes, (7) waive a redemption payment with respect to
any senior note (other than a payment required by one of the covenants described
above under the caption "--Repurchase at the Option of Holders"), (8) make any
change in the foregoing amendment and waiver provisions or (9) release any
senior subordinated note guarantor from any of its obligations under its
subordinated subsidiary guarantee or this senior subordinated note indenture,
except in accordance with the terms of this senior subordinated note indenture.
Notwithstanding the foregoing, without the consent of any holder of senior
notes, our company and the senior note trustee may amend or supplement the
senior note indenture or the senior notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated senior notes in addition to or in
place of certificated senior notes, to provide for the assumption of our
company's obligations to holders of senior notes in the case of a merger or
consolidation or sale of all or substantially all of our company's assets, to
make any change that would provide any additional rights or benefits to the
holders of senior notes or that does not adversely affect the legal rights under
the senior note indenture of any such holder, to comply with requirements of the
Commission in order to effect or maintain the qualification of the senior note
indenture under the Trust Indenture Act to provide for the issuance of
additional senior subordinated notes in accordance with the limitations
contained in this senior subordinated note indenture as of the date hereof or to
allow any senior subordinated note guarantor to execute a supplemental senior
subordinated note indenture and/or a subordinated subsidiary guarantee with
respect to the senior subordinated notes.
Concerning the Senior Note Trustee
The senior note indenture contains certain limitations on the rights of
the senior note trustee, should it become a creditor of our company, to obtain
payment of claims in certain cases, or to realize on certain property received
in respect of any such claim as security or otherwise. The senior note trustee
will be permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
senior notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the senior note
trustee, subject to certain exceptions. The senior note indenture provides that
in case an Event of Default shall occur (which shall not be cured), the senior
note trustee will be required, in the exercise of its power, to use the degree
of care of a prudent man in the conduct of his own affairs. Subject to such
provisions, the senior note trustee will be under no obligation to exercise any
of its rights or powers under the senior note indenture at the request of any
holder of senior notes, unless such holder shall have offered to the senior note
trustee security and indemnity satisfactory to it against any loss, liability or
expense.
Book-Entry, Delivery and Form
The certificates representing the senior notes will be issued in fully
registered form. Except as described in the next paragraph, the senior notes
initially will be represented by permanent global senior notes, in definitive,
fully registered form without interest coupons and will be deposited with the
senior note trustee as custodian for The Depositary Trust Company, New York, New
York ("DTC") and registered in the name of a nominee of DTC.
Except as described below, the global senior notes may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the global senior notes may not be
exchanged for senior notes in certificated form except in the limited
circumstances described below. See "--Exchange of Book-Entry Senior Notes for
Certificated Senior Notes." Except in the limited circumstances described below,
owners of beneficial interests in the global senior note will not be entitled to
receive physical delivery of certificated senior notes (as defined below).
The senior note trustee will act as Paying Agent and Registrar. The senior
notes may be presented for registration of transfer and exchange at the offices
of the Registrar.
Depository Procedures
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems and are subject
to changes by them from time to time. Our company takes no responsibility for
these operations and procedures and urges investors to contact the system or
their participants directly to discuss these matters.
30
DTC has advised our company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The participants include
securities brokers and dealers (including the Initial Purchaser, banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised our company that, pursuant to procedures established
by it, (1) upon deposit of the global senior notes, DTC will credit the accounts
of Participants designated by the Initial Purchaser with portions of the
principal amount of the global senior notes and (2) ownership of such interests
in the global senior notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC (with respect
to the Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interest in the global senior notes).
Investors in the global senior notes may hold their interests therein
directly through DTC, if they are Participants in such system, or indirectly
through organizations which are Participants in such system. All interests in a
global senior note may be subject to the procedures and requirements of DTC. The
laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a global senior note to such persons will be
limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having beneficial interests in a global senior note to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the global senior notes
will not have senior notes registered in their names, will not receive physical
delivery of senior notes in certificated form and will not be considered the
registered owners or "holders" thereof under the senior note indenture for any
purpose.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a global senior note registered in the name of
DTC or its nominee will be payable to DTC in its capacity as the registered
holder under the senior note indenture. Under the terms of the senior note
indenture, our company and the senior note trustee will treat the persons in
whose names the senior notes, including the global senior notes, are registered
as the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither our company, the senior
note trustee nor any agent of our company or the senior note trustee has or will
have any responsibility or liability for (1) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interests in the global senior notes, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the global senior notes or (2) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised our company that its current practice, upon receipt of any payment in
respect of securities such as the senior notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in the principal amount of beneficial interests in the relevant
security as shown on the records of DTC unless DTC has reason to believe it will
not receive payment on such payment date. Payments by the Participants and the
Indirect Participants to the beneficial owners of senior notes will be governed
by standing instructions and customary practices and will be the responsibility
of the Participants or the Indirect Participants and will not be the
responsibility of DTC, the senior note trustee or our company. Neither our
company nor the senior note trustee will be liable for any delay by DTC or any
of its Participants in identifying the beneficial owners of the senior notes,
and our company and the senior note trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee for all purposes.
The global senior notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its Participants. See "--Same Day
Settlement and Payment."
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same day funds.
31
DTC has advised our company that it will take any action permitted to be
taken by a holder of senior notes only at the direction of one or more
Participants to whose account DTC has credited the interests in the global
senior notes and only in respect of such portion of the aggregate principal
amount of the senior notes as to which such Participant or Participants has or
have given such direction. However, if there is an Event of Default under the
senior notes, DTC reserves the right to exchange the global senior notes for
legended senior notes in certificated form, and to distribute such senior notes
to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interests in the global senior notes among Participants in DTC, it
is under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. Neither our company nor the
senior note trustee nor any of their respective agents will have any
responsibility for the performance by DTC or its participants or indirect
participants of its obligations under the rules and procedures governing its
operations.
Exchange of Book-Entry Senior Notes for Certificated Senior Notes
A global senior note is exchangeable for definitive senior notes in
registered certificated form ("certificated senior notes") if (1) DTC (x)
notifies our company that it is unwilling or unable to continue as depositary
for the global senior notes and our company thereupon fails to appoint a
successor depositary or (y) has ceased to be a clearing agency registered under
the Exchange Act, (2) our company, at its option, notifies the senior note
trustee in writing that it elects to cause the issuance of the certificated
senior notes or (3) there shall have occurred and be continuing a Default or
Event of Default with respect to the senior notes. In addition, beneficial
interests in a global senior note may be exchanged for certificated senior notes
upon request but only upon prior written notice given to the senior note trustee
by or on behalf of DTC in accordance with the senior note indenture. In all
cases, certificated senior notes delivered in exchange for any global senior
note or beneficial interests therein will be registered in the names, and issued
in any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures).
Exchange of Certificated Senior Notes for Book-Entry Senior Notes
Senior notes issued in certificated form may be exchanged for beneficial
interests in any global senior note.
Same Day Settlement and Payment
The senior note indenture will require that payments in respect of the
senior notes represented by the global senior notes (including principal,
premium, if any, interest and Liquidated Damages, if any) be made by wire
transfer of immediately available funds to the accounts specified by the global
senior note holder. With respect to senior notes in certificated form, our
company will make all payments of principal, premium, if any, interest and
Liquidated Damages, if any, by wire transfer of immediately available funds to
the accounts specified by the holders thereof or, if no such account is
specified, by mailing a check to each such holder's registered address. The
senior notes represented by the global senior notes are expected to trade in
DTC's Same-Day Funds Settlement System, and any permitted secondary market
trading activity in such senior notes will, therefore, be required by DTC to be
settled in immediately available funds. We expect that secondary trading in any
certificated senior notes will also be settled in immediately available funds.
Definitions
The following are defined terms used in the senior note indenture.
Reference is made to the senior note indenture for a full disclosure of all such
terms, as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Debt" means, with respect to any specified Person, (1)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (2) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Acquisition" means the Acquisition by our company of: (1) all of the
common stock of Peabody Holding Company, (2) all of the common stock of Gold
Fields Mining Corp., (3) all of the membership interests of Citizens Power, (4)
the 1% interests in CL Hartford, L.L.C., a Delaware limited liability company,
and Citizens Power Sales, a Delaware general partnership, both subsidiaries of
Citizens Power, (5) all of the shares of Darex Capital Inc., a company
incorporated in the Republic of Panama, and (6) all of the ordinary shares of
Peabody Australia Ltd., which together with Darex Capital, Inc. owns Peabody
Resources.
32
"Additional Assets" means (1) any property or assets (other than capital
stock, Indebtedness or rights to receive payments over a period greater than 180
days, other than with respect to coal supply contract restructurings) that is
usable by our company or a Restricted Subsidiary in a Permitted Business or (2)
the capital stock of a Person that is at the time, or becomes, a Restricted
Subsidiary as a result of the Acquisition of such capital stock by our company
or another Restricted Subsidiary.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Asset Sale" means (1) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of our company and
its Restricted Subsidiaries taken as a whole will be governed by the provisions
of the senior note indenture described above under the caption "--Change of
Control" and/or the provisions described above under the caption "--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant), and (2) the issue or sale by our company or any of its Restricted
Subsidiaries of Equity Interests of any of our company's Restricted
Subsidiaries, in the case of either clause (1) or (2), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $5.0 million or (b) for Net Proceeds in excess of $5.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (1) a transfer of assets by our company to a Restricted
Subsidiary or by a Restricted Subsidiary to our company or to another Restricted
Subsidiary, (2) an issuance of Equity Interests by a Restricted Subsidiary to
our company or to another Restricted Subsidiary, (3) a Restricted Payment that
is permitted by, or an Investment that is not prohibited by, the covenant
described above under the caption "--Restricted Payments," (4) a disposition of
Cash Equivalents or obsolete equipment, (5) foreclosures on assets, (6) the sale
or discount, in each case without recourse, of accounts receivable arising in
the ordinary course of business, but only in connection with the compromise or
collection thereof and (7) the factoring of accounts receivable arising in the
ordinary course of business under arrangements customary in the industry.
"Bengalla Joint Venture" means Bengalla Mining Co. Pty Limited, Bengalla
Agricultural Co. Pty Limited and Bengalla Coal Sales Co. Pty Ltd. which are the
joint venture companies related to the Bengalla mine in New South Wales,
Australia.
"Black Beauty Coal Company" means the Indiana general partnership among
Thoroughbred, L.L.C., Black Beauty Resources, Inc. and Pittsburg and Midway Coal
Mining Co., and any Person collectively owned by those three partners including,
but not limited to, Eagle Coal Company and Falcon Coal Company.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Cash Equivalents" means (a) securities with maturities of one year or
less from the date of Acquisition issued or fully guaranteed or insured by the
U.S. Government or any agency thereof, (b) certificates of deposit and time
deposits with maturities of one year or less from the date of Acquisition and
overnight bank deposits of any lender under the Senior Credit Facilities or of
any commercial bank having capital and surplus in excess of $500.0 million, (c)
repurchase obligations of any lender under the Senior Credit Facilities or of
any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than 90 days with respect to securities
issued or fully guaranteed or insured by the United States Government, (d)
commercial paper of a domestic issuer rated at least A-2 by Standard and Poor's
Rating Group ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's"), or
carrying an equivalent rating by a nationally recognized rating agency if both
of S&P and Moody's cease publishing ratings of investments, (e) securities with
maturities of one year or less from the date of Acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A by Moody's, (f)
securities with maturities of one year or less from the date of Acquisition
backed by standby letters of credit issued by any lender under the Senior Credit
Facilities or any commercial bank satisfying the requirements of clause (b) of
this definition or (g) shares of money market mutual or similar funds which
invest exclusively in assets satisfying the requirements of clauses (a) through
(f) of this definition.
33
"Citizens Power" means Citizens Power LLC, a Delaware limited liability
company and its direct and indirect Subsidiaries.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (1) provision
for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (2) consolidated
interest expense of such Person and its Restricted Subsidiaries for such period,
whether paid or accrued and whether or not capitalized (including, without
limitation, amortization of debt issuance costs, deferred financing fees and
original issue discount, noncash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income, plus (3) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income), plus (4) depreciation,
depletion, amortization (including amortization of goodwill and other
intangibles) and other noncash expenses (including, without limitation,
writedowns and impairment of property, plant and equipment and intangibles and
other long-lived assets) (excluding any such noncash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Restricted Subsidiaries for such period to the extent that such
depreciation, depletion, amortization and other noncash expenses were deducted
in computing such Consolidated Net Income, minus (5) noncash items increasing
such Consolidated Net Income for such period (other than accruals in accordance
with GAAP), plus (6) without duplication for amounts otherwise included in
Consolidated Cash Flow, the amount of our company's and its Restricted
Subsidiaries' proportionate share of the Consolidated Cash Flow of Black Beauty
Coal Company and its Subsidiaries for such period (calculated in proportion to
our company's and its Restricted Subsidiaries common equity ownership), in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation, depletion and amortization and other noncash expenses
of, a Restricted Subsidiary that is not a senior note guarantor shall be added
to Consolidated Net Income to compute Consolidated Cash Flow only to the extent
that a corresponding amount would be permitted at the date of determination to
be dividended to our company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction under the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that (1) the Net Income of any Person that is not a Subsidiary or that
is accounted for by the equity method of accounting shall be included only to
the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Restricted Subsidiary thereof, (2) the Net Income of any
Restricted Subsidiary that is not a senior note guarantor shall be excluded to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (3) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such Acquisition shall
be excluded, (4) the cumulative effect of a change in accounting principles
shall be excluded, and (5) the Net Income (or loss) of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to our company or one
of its Restricted Subsidiaries.
"Credit Facilities" means, with respect to our company or any of its
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the Senior Credit Facilities) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time. Indebtedness under Credit Facilities outstanding on the
date on which senior notes are first issued and authenticated under the senior
note indenture shall be deemed to have been incurred on such date in reliance on
the exception provided by clause (1) of the definition of Permitted
Indebtedness.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Designated Noncash Consideration" means the fair market value of noncash
consideration received by our company or one of its Restricted Subsidiaries in
connection with an Asset Sale that is so designated as Designated Noncash
34
Consideration pursuant to an Officers' Certificate, setting forth the basis of
such valuation, executed by the principal executive officer and the principal
financial officer of our company, less the amount of cash or Cash Equivalents
received in connection with a sale of such Designated Noncash Consideration.
"Disqualified Stock" means any capital stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, under a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in
part, on or prior to the date that is 91 days after the date on which the senior
notes mature; provided, however, that any capital stock that would constitute
Disqualified Stock solely because the holders thereof have the right to require
our company to repurchase such capital stock upon the occurrence of a Change of
Control or an Asset Sale shall not constitute Disqualified Stock if the terms of
such capital stock provide that our company may not repurchase or redeem any
such capital stock under such provisions unless such repurchase or redemption
complies with the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"Domestic Subsidiary" means a Subsidiary that is (1) formed under the laws
of the United States of America or a state or territory thereof or (2) as of the
date of determination, treated as a domestic entity or a partnership or a
division of a domestic entity for United States federal income tax purposes.
"Equity Interests" means capital stock and all warrants, options or other
rights to acquire capital stock (but excluding any debt security that is
convertible into, or exchangeable for, capital stock).
"Equity Offering" means any public or private sale of equity securities
(excluding Disqualified Stock) of our company, other than any private sales to
an Affiliate of our company.
"Escrow Account" means the escrow account maintained under the Escrow
Letter.
"Escrow Letter" means that certain escrow letter dated March 2, 1998, by
and among Lazard Brothers & Co., Limited, The Energy Group PLC, Peabody
Investments Inc. and Peabody Energy Corporation.
"Existing Citizens Power Investment" means the Investments in Citizens
Power by our company and its Restricted Subsidiaries as of the date of the
closing of the Acquisition.
"Existing Indebtedness" means up to $292.5 million in aggregate principal
amount of Indebtedness of our company and its Restricted Subsidiaries (other
than Indebtedness under the Senior Credit Facilities, the senior notes, the
senior exchange subordinated notes and related guarantees) in existence on the
date of the closing of the Acquisition, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (1) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, noncash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letters
of credit or bankers' acceptance financings, and net payments (if any) under
Hedging Obligations, but excluding amortization of debt issuance costs) and (2)
the consolidated interest of such Person and its Restricted Subsidiaries that
was capitalized during such period, and (3) any interest expense on the portion
of Indebtedness of another Person that is guaranteed by such Person or one of
its Restricted Subsidiaries or secured by a Lien on assets of such Person or one
of its Restricted Subsidiaries (whether or not such guarantee or Lien is called
upon) and (4) the product of (a) all dividend payments, whether or not in cash,
on any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of our company (other than Disqualified Stock) or to our
company or a Restricted Subsidiary of our company, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the
effective combined federal, state and local tax rate of such Person for such
period, expressed as a decimal, in each case, for our company and its Restricted
Subsidiaries on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person and its
Restricted Subsidiaries for any period, the ratio of the Consolidated Cash Flow
of such Person and its Restricted Subsidiaries for such period to the Fixed
Charges of such Person and its Restricted Subsidiaries for such period. In the
event that the referent Person or any of its Restricted Subsidiaries incurs,
assumes, guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems preferred stock subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
35
assumption, guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (1) Acquisitions that have been made
by our company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions and including
pro forma cost savings permitted by Article 11 of Regulation S-X, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be given pro forma effect as if they had
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (3) of the proviso contained in the definition of Consolidated Net
Income, and (2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (3) the Fixed
Charges attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the Calculation
Date, shall be excluded, but only to the extent that the obligations giving rise
to such Fixed Charges will not be obligations of the referent Person or any of
its Restricted Subsidiaries following the Calculation Date.
"Foreign Subsidiaries" means Subsidiaries of our company that are not
Domestic Subsidiaries.
"GAAP" means generally accepted accounting principles described in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the senior note indenture.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (1) currency exchange, interest rate or commodity swap
agreements, currency exchange, interest rate or commodity cap agreements and
currency exchange, interest rate or commodity collar agreements and (2) other
agreements or arrangements designed to protect such Person against fluctuations
in currency exchange, interest rates or commodity prices, in each case for the
purpose of risk management and not for speculation.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, if and
to the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person, but excluding from the
definition of "Indebtedness," any of the foregoing that constitutes (1) an
accrued expense, (2) trade payables and (3) Obligations in respect of
reclamation, workers' compensation, including black lung, pensions and retiree
health care, in each case to the extent not overdue for more than 90 days. The
amount of any Indebtedness outstanding as of any date shall be (i) the accreted
value thereof, in the case of any Indebtedness issued with original issue
discount, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of direct or indirect
loans (including guarantees, other than performance guarantees provided for the
benefit of Citizens Power, of any portion of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other Acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If our company or any Restricted Subsidiary of our company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of our company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of our company, our company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
36
"Marketable Securities" means, with respect to any Asset Sale, any readily
marketable equity securities that are (1) traded on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market; and (2) issued by a
corporation having a total equity market capitalization of not less than $250.0
million; provided that the excess of (A) the aggregate amount of securities of
any one such corporation held by our company and any Restricted Subsidiary over
(B) ten times the average daily trading volume of such securities during the 20
immediately preceding trading days shall be deemed not to be Marketable
Securities; as determined on the date of the contract relating to such Asset
Sale.
"Net Income" means, with respect to any Person, the net income or loss of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (1) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with (a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (2) any extraordinary or nonrecurring gain or loss, together
with any related provision for taxes on such extraordinary or nonrecurring gain
or loss.
"Net Proceeds" means the aggregate proceeds (cash or property) received by
our company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any noncash consideration received in any Asset Sale) or the sale
or disposition of any Investment, net of the direct costs relating to such Asset
Sale, sale or disposition, (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Non-Guarantor Subsidiaries" means (1) Citizens Power and its direct and
indirect Subsidiaries, (2) our company's future Unrestricted Subsidiaries and
(3) our company's current and future Foreign Subsidiaries.
"Non-Recourse Debt" means Indebtedness (1) as to which neither our company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness) other than a pledge of the Equity Interests of any Unrestricted
Subsidiaries, (b) is directly or indirectly liable (as a guarantor or otherwise)
other than by virtue of a pledge of the Equity Interests of any Unrestricted
Subsidiaries, or (c) constitutes the lender; and (2) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the senior notes being offered hereby) of our company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
"Obligations" means any principal, premium (if any), interest, penalties,
fees, charges, expenses, indemnifications, reimbursement obligations, damages,
guarantees and other liabilities and amounts payable under the documentation
governing any Indebtedness or in respect thereto.
"Permitted Business" means coal production, coal mining, coal brokering,
coal transportation, mine development, power marketing, electricity generation,
power/energy sales and trading, energy transactions/asset restructurings, risk
management products associated with energy, fuel/power integration and other
energy related businesses, ash disposal, environmental remediation, coal,
natural gas, petroleum or other fossil fuel exploration, production, marketing,
transportation and distribution and other related businesses, and activities of
our company and its Subsidiaries as of the date of the closing of the
Acquisition and any business or activity that is reasonably similar thereto or a
reasonable extension, development or expansion thereof or ancillary thereto.
"Permitted Investments" means (a) any Investment in our company or in a
Restricted Subsidiary of our company; (b) any Investment in Cash Equivalents;
(c) any Investment by our company or any Restricted Subsidiary of our company in
a Person, if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary of our company or (ii) such Person, in one transaction or a series of
related transactions, is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
our company or a Restricted Subsidiary of our company; (d) any Acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of our company; (e) any Investment existing on the date of
the closing of the Acquisition (an "Existing Investment") and any Investment
that replaces, refinances or refunds an Existing Investment, provided that the
new Investment is in an amount that does not exceed the amount replaced,
refinanced or refunded and is made in the same Person as the Investment
replaced, refinanced or refunded, (f) advances to employees not in excess of
$10.0 million outstanding at any one time; (g) Hedging Obligations permitted
under clause (9) of the "--Incurrence of Indebtedness and Issuance of Preferred
Stock" covenant;
37
(h) loans and advances to officers, directors and employees for business-related
travel expenses, moving expenses and other similar expenses, in each case
incurred in the ordinary course of business; (i) any Investment in a Permitted
Business (whether or not an Investment in an Unrestricted Subsidiary) having an
aggregate fair market value, when taken together with all other Investments made
pursuant to this clause (i), does not exceed in aggregate amount the sum of (1)
10% of Total Assets at the time of such Investment (with the fair market value
of each Investment being measured at the time made and without giving effect to
subsequent changes in value) plus (2) 100% of the Net Proceeds from the sale or
disposition of any Investment previously made pursuant to this clause (i) or
100% of the amount of any dividend, distribution or payment from any such
Investment, net of income taxes paid or payable in respect thereof, in each case
up to the amount of the Investment that was made pursuant to this clause (i) and
50% of the amount of such Net Proceeds or 50% of such dividends, distributions
or payments, in each case received in excess of the amount of the Investments
made pursuant to this clause (i); (j) guarantees of Indebtedness permitted under
the covenant "--Incurrence of Indebtedness and Issuance of Preferred Stock;" (k)
any Investment acquired by our company or any of its Restricted Subsidiaries (A)
in exchange for any other Investment or accounts receivable held by our company
or any such Restricted Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the issuer of such
other Investment or accounts receivable or (B) as a result of the transfer of
title with respect to any secured Investment in default as a result of a
foreclosure by our company or any of its Restricted Subsidiaries with respect to
such secured Investment; (l) any Investment in Black Beauty Coal Company having
an aggregate fair market value, taken together with all other Investments made
pursuant to this clause (l), that are at the time outstanding not to exceed
$50.0 million (with any write-down or write-off of any such Investment deemed to
remain outstanding); (m) Investments in Citizens Power having an aggregate fair
market value, taken together with all other Investments made pursuant to this
clause (m), that are at that time outstanding not to exceed $50.0 million at the
time of such Investment (with the fair market value of each Investment being
measured at the time made and without giving effect to subsequent changes in
value); (n) any Investment in the Bengalla Joint Venture and the Warkworth
Associates Joint Venture having an aggregate fair market value, taken together
with all other Investments made pursuant to this clause (n), that are at the
time outstanding, not to exceed $25.0 million (with any write-down or write-off
of any such Investment deemed to remain outstanding); (o) that portion of any
Investment by our company or a Restricted Subsidiary in a Permitted Business to
the extent that our company or such Restricted Subsidiary will receive in a
substantially concurrent transaction an amount in cash equal to the amount of
such Investment (or the fair market value of such Investment), net of any
obligation to pay taxes or other amounts in respect of the receipt of such cash;
provided that the receipt of such cash does not carry any obligation by our
company or such Restricted Subsidiary to repay or return such cash; and (p) the
forgiveness or cancellation of any payable due from Citizens Power and its
direct and indirect Subsidiaries outstanding on the date of the closing of the
Acquisition; provided, however, that with respect to any Investment, our company
may, in its sole discretion, allocate all or any portion of any Investment to
one or more of the above clauses so that the entire Investment would be a
Permitted Investment.
"Permitted Liens" means (1) Liens securing Indebtedness under Credit
Facilities that were permitted by the terms of the senior note indenture to be
incurred; (2) Liens in favor of our company; (3) Liens on property of a Person
existing at the time such Person is merged into or consolidated with our company
or any Restricted Subsidiary of our company; provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or consolidated
with our company; (4) Liens on property existing at the time of Acquisition
thereof by our company or any Restricted Subsidiary of our company, provided
that such Liens were in existence prior to the contemplation of such
Acquisition; (5) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (6) Liens incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance or other kinds of social security; (7) Liens existing on
the date of the closing of the Acquisition; (8) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (9)
Liens on assets of senior note guarantors to secure Senior Debt of such senior
note guarantors that was permitted by the senior note indenture to be incurred;
(10) Liens incurred in the ordinary course of business of our company or any
Restricted Subsidiary of our company with respect to obligations that (a) are
not incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of business)
and (b) do not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of business by
our company or such Restricted Subsidiary; (11) Liens on assets of Foreign
Subsidiaries to secure Indebtedness that was permitted by the senior note
indenture to be incurred; (12) statutory liens of landlords, mechanics,
suppliers, vendors, warehousemen, carriers or other like Liens arising in the
ordinary course of business; (13) judgment Liens not giving rise to an Event of
Default so long as any appropriate legal proceeding that may have been duly
initiated for the review of such judgment shall not have been finally terminated
or the period within which such legal proceeding may be initiated shall not have
expired; (14) easements, rights-of-way, zoning and similar restrictions and
other similar encumbrances or title defects incurred or imposed, as applicable,
in the ordinary course of
38
business and consistent with industry practices which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto (as such property is used by our company
or its Subsidiaries) or interfere with the ordinary conduct of the business of
our company or such Subsidiaries; provided, however, that any such Liens are not
incurred in connection with any borrowing of money or any commitment to loan any
money or to extend any credit; (15) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (6) of the second paragraph of
the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred
Stock" and other purchase money Liens to finance property or assets of our
company or any Restricted Subsidiary acquired in the ordinary course of
business; provided that such Liens are only secured by such property or assets
so acquired or improved (including, in the case of the Acquisition of capital
stock, of a Person who becomes a Restricted Subsidiary, Liens on the assets of
the Person whose capital stock was so acquired); (16) Liens securing
Indebtedness under Hedging Obligations; provided that such Liens are only
secured by property or assets that secure the Indebtedness subject to the
Hedging Obligation; (17) Liens to secure Indebtedness permitted by clause (15)
of the second paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock;" and (18) Liens on the Equity Interests of
Unrestricted Subsidiaries securing obligations of Unrestricted Subsidiaries not
otherwise prohibited by the senior note indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of our company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of our company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (1) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest and premium, if any, on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (2) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the senior notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the senior notes on terms at least
as favorable to the holders of senior notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (4) such Indebtedness is incurred either by
our company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Credit Facilities" means those certain Senior Credit Facilities,
dated as of May 18, 1998, by and among our company, the senior note guarantors,
Lehman Commercial Paper Inc., as Arranger, Syndication Agent and the
Administrative Agent and the other lenders party thereto, including any related
notes, guarantees, collateral documents, letters of credit, instruments and
agreements executed in connection therewith (and any appendices, exhibits or
schedules to any of the foregoing), and in each case as amended, modified,
supplemented, restated, renewed, refunded, replaced, restructured, repaid or
refinanced from time to time (whether with the original agents and lenders or
other agents and lenders or otherwise, and
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
under the Securities Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subordinated Subsidiary Guarantees" mean the guarantees endorsed on the
senior subordinated notes by the Subordinated Note Guarantors.
"Subsidiary" means, with respect to any Person, (1) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or senior note
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (2) any partnership (a) the sole general partner or the
managing general partner of which is such Person or a Subsidiary of such
39
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Total Assets" means the total assets of our company and its Restricted
Subsidiaries on a consolidated basis determined in accordance with GAAP, as
shown on the most recently available consolidated balance sheet of our company
and its Restricted Subsidiaries.
"Transaction Documents" means the documents related to (1) the Acquisition
(including, without limitation, the purchase agreement, the participation
agreement and the escrow agreement), (2) the Senior Credit Facilities and (3)
the original offering of the notes.
"Treasury Rate" means the yield to maturity at the time of the computation
of the United States Treasury securities with a constant maturity (as compiled
by and published in the most recent Federal Reserve Statistical Release
H.15(519), which has become publicly available at least two Business Days prior
to the date fixed for redemption (or if such Statistical Release is no longer
published, any publicly available source of similar market data)) most nearly
equal to the then remaining average life to May 15, 2003; provided, however,
that if the average life of such senior note is not equal to the constant
maturity of the United States Treasury security for which weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the average life of such senior note is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
"Unrestricted Subsidiary" means (1) Citizens Power, any direct or indirect
Subsidiary of Citizens Power on the date of the senior note indenture and (2)
any Subsidiary that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution; but only to the extent that such
Person: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party
to any agreement, contract, arrangement or understanding with our company or any
Restricted Subsidiary of our company unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to our company or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of our company; (c) is a Person with respect to
which neither our company nor any of its Restricted Subsidiaries has any
obligation (x) to subscribe for additional Equity Interests in Unrestricted
Subsidiaries or (y) to maintain or preserve such Person's net worth (except with
respect to Permitted Investments); and (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of our
company or any of its Restricted Subsidiaries; provided, however, that our
company and its Restricted Subsidiaries may guarantee the performance of
Unrestricted Subsidiaries in the ordinary course of business except for
guarantees of Obligations in respect of borrowed money. Any such designation by
the Board of Directors shall be evidenced to the senior note trustee by filing
with the senior note trustee a certified copy of the Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption "Certain Covenants--Restricted
Payments."
"Voting Stock" of any Person as of any date means the capital stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Warkworth Associates Joint Venture" means Warkworth Coal Sales Ltd.,
Warkworth Pastoral Co. Pty, Limited and Warkworth Mining Limited, which are the
joint venture companies related to the Warkworth mine in New South Wales,
Australia.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding capital stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding capital stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
40
DESCRIPTION OF THE SENIOR SUBORDINATED NOTES
The following is a summary of the material terms of the senior
subordinated notes and is qualified in its entirety by reference to the
indenture (the "senior subordinated notes indenture") between our company and
State Street Bank and Trust Company, as trustee (the "senior subordinated note
trustee").
General
The senior subordinated notes were issued under the senior subordinated
note indenture. The terms of the senior subordinated notes include those stated
in the senior subordinated note indenture and those made part of the senior
subordinated note indenture by reference to the Trust Indenture Act. The senior
subordinated notes are subject to all such terms, and holders of senior
subordinated notes are referred to the senior subordinated note indenture and
the Trust Indenture Act. The following summary of the material provisions of the
senior subordinated note indenture does not purport to be complete and is
qualified in its entirety by reference to the senior subordinated note
indenture, including the definitions therein of certain terms used below. Copies
of the senior subordinated note indenture are available as described below under
"Available Information." The definitions of certain terms used in the following
summary are described below under "--Definitions." For purposes of this summary,
the term "company" refers only to Peabody Energy Corporation and not to any of
its Subsidiaries.
On May 18, 1998, our company issued $500.0 million aggregate principal
amount of senior subordinated notes under the senior subordinated note
indenture.
The senior subordinated notes are general unsecured obligations of our
company and are subordinated in right of payment to all current and future
Senior Debt. As of March 31, 2001, on a pro forma basis, after giving effect to
the use of proceeds from the initial public offering of our common stock, our
company had Senior Debt of $529.0 million and $436.6 million was available for
additional borrowing or for letters of credit available under credit facilities.
Additionally, after the consummation of the initial public offering of our
common stock, we had total borrowing capacity of $470.0 million under the senior
credit facilities and revolving credit facilities of our subsidiary Black
Beauty. The senior subordinated note indenture permits the incurrence of
additional Senior Debt in the future.
Under certain circumstances, our company may designate current or future
Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries are not
subject to many of the restrictive covenants contained in the senior
subordinated note indenture.
Principal, Maturity and Interest
The senior subordinated notes are limited in aggregate principal amount to
$650.0 million, of which $500.0 million was issued in the Offering, and will
mature on May 15, 2008. In June 2001, we purchased $91.7 million aggregate
principal amount of the senior subordinated notes. Interest on the senior
subordinated notes accrues at the rate of 9 5/8% per annum and is payable
semi-annually in arrears on May 15 and November 15, commencing on November 15,
1998, to holders of record on the immediately preceding May 1 and November 1.
Additional senior subordinated notes may be issued from time to time after the
Offering, subject to the provisions of the senior subordinated note indenture
described below under the caption "--Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock." Interest on the senior subordinated notes accrues
from the most recent date to which interest has been paid or, if no interest has
been paid, from May 18, 1998. Interest is computed on the basis of a 360-day
year comprised of twelve 30-day months. Principal, premium, if any, and interest
and Liquidated Damages, if any, on the senior subordinated notes are payable at
the office or agency of our company maintained for such purpose within the City
and State of New York or, at the option of our company, payment of interest and
Liquidated Damages, if any, may be made by check mailed to the holders of the
senior subordinated notes at their respective addresses listed in the register
of holders of senior subordinated notes; provided that all payments of
principal, premium, interest and Liquidated Damages, if any, with respect to
senior subordinated notes the holders of which have given wire transfer
instructions to our company are required to be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof.
Until otherwise designated by our company, our company's office or agency in New
York will be the office of the senior subordinated note trustee maintained for
such purpose. The senior subordinated notes were issued in denominations of
$1,000 and integral multiples thereof.
Subordination
The payment of principal of, premium, if any, and interest on the senior
subordinated notes is subordinated in right of payment, as described in the
senior subordinated note indenture, to the prior payment in full in cash of all
Senior Debt, whether outstanding on the date of the senior subordinated note
indenture or thereafter incurred.
41
Upon any distribution to creditors of our company in a liquidation or
dissolution of our company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to our company or its property, an
assignment for the benefit of creditors or any marshaling of our company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full in cash of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt, whether or not an allowable claim in
any such proceeding) before the holders of senior subordinated notes will be
entitled to receive any payment with respect to the senior subordinated notes,
and until all Obligations with respect to Senior Debt are paid in full, any
distribution to which the holders of senior subordinated notes would be entitled
shall be made to the holders of Senior Debt (except that, in each case, holders
of senior subordinated notes may receive and retain Permitted Junior Securities
and payments made from the trust described under "--Legal Defeasance and
Covenant Defeasance").
We also may not make any payment upon or in respect of the senior
subordinated notes (except in Permitted Junior Securities or from the trust
described under "--Legal Defeasance and Covenant Defeasance") if (1) a default
in the payment of the principal of, premium, if any, or interest on Designated
Senior Debt occurs and is continuing or (2) any other default occurs and is
continuing with respect to Designated Senior Debt that permits holders of the
Designated Senior Debt as to which such default relates to accelerate its
maturity (or that would permit such holders to accelerate with the giving of
notice or the passage of time or both) and the senior subordinated note trustee
receives a notice of such default (a "Payment Blockage Notice") from our company
or the holders of any Designated Senior Debt. Payments on the senior
subordinated notes may and shall be resumed (a) in the case of a payment
default, upon the date on which such default is cured or waived and (b) in case
of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived or 179 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any Designated
Senior Debt has been accelerated. No new period of payment blockage may be
commenced with respect to any particular Designated Senior Debt unless and until
(1) 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice and (2) all scheduled payments of principal, premium, if
any, and interest and Liquidated Damages, if any, on the senior subordinated
notes that have come due have been paid in full in cash. No nonpayment default
that existed or was continuing on the date of delivery of any Payment Blockage
Notice to the senior subordinated note trustee shall be, or be made, the basis
for a subsequent Payment Blockage Notice unless such default shall have been
waived for a period of not less than 90 days.
The senior subordinated note indenture will further require that our
company promptly notify holders of Senior Debt if payment of the senior
subordinated notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of senior subordinated notes may recover
less ratably than creditors of our company who are holders of Senior Debt. The
principal amount of Senior Debt outstanding at March 31, 2001, was approximately
$736.8 million. The senior subordinated note indenture will limit, subject to
certain financial tests, the amount of additional Indebtedness, including Senior
Debt, that our company and its Subsidiaries can incur. See "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
"Designated Senior Debt" means (1) any Indebtedness of our company or any
of its Restricted Subsidiaries outstanding under Credit Facilities, (2) any
Indebtedness outstanding under the senior note indenture and (3) any other
Senior Debt permitted under the senior subordinated note indenture the principal
amount of which is $25.0 million or more and that has been designated by our
company as "Designated Senior Debt."
"Permitted Junior Securities" means Equity Interests in our company or
any senior subordinated note guarantor or debt securities that are subordinated
to all Senior Debt (and any debt securities issued in exchange for Senior Debt)
to substantially the same extent as, or to a greater extent than, the senior
subordinated notes and the Subordinated Subsidiary guarantees are subordinated
to Senior Debt under Article 10 of the senior subordinated note indenture.
"Senior Debt" means (1) all Indebtedness of our company or any of its
Restricted Subsidiaries outstanding under Credit Facilities and all Hedging
Obligations with respect thereto, (2) any other Indebtedness permitted to be
incurred by our company or any of its Restricted Subsidiaries under the terms of
the senior subordinated note indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the senior subordinated notes or any
guarantee of the senior subordinated notes and (3) all Obligations with respect
to the foregoing. Notwithstanding anything to the contrary in the foregoing,
Senior Debt will not include (w) any liability for federal, state, local or
other taxes owed or owing by our company or any Subsidiary, (x) any Indebtedness
of our company or any Subsidiary to any Subsidiaries of our company or to our
company, (y) any trade payables or (z) any Indebtedness that is incurred in
violation of the senior subordinated note indenture.
42
Senior Subordinated Note Guarantees
Our company's payment obligations under the senior subordinated notes will
be fully and unconditionally, and jointly and severally, guaranteed by the
senior subordinated note guarantors. The senior subordinated note guarantee of
each senior subordinated note guarantor will be subordinated to the prior
payment in full of all Senior Debt of the senior subordinated note guarantors
and the amounts for which the senior subordinated note guarantors will be liable
under the guarantees issued from time to time with respect to Senior Debt. The
obligations of each senior subordinated note guarantor under its senior
subordinated guarantee will be limited to the maximum amount that would not
constitute a fraudulent conveyance under applicable law. See "Risk
Factors--Risks Relating to the Notes--Your Rights Under the Notes Could Be
Limited By Fraudulent Conveyance Laws." Notwithstanding the foregoing, no
Subsidiary of our company will be required to endorse a senior subordinated note
guarantee unless such Subsidiary is required to, and does, simultaneously
execute a guarantee of the Senior Credit Facilities.
As of June 30, 2001, the senior subordinated note guarantors were:
Affinity Mining Company, Arid Operations Inc., Big Sky Coal Company, Bluegrass
Coal Company, Caballo Coal Company, Charles Coal Company, Cleaton Coal Company,
Coal Properties Corp., Colony Bay Coal Company, Cook Mountain Coal Company,
Cottonwood Land Company, EACC Camps, Inc., Eastern Associated Coal Corp.,
Eastern Royalty Corp., Gallo Finance Company, Gold Fields Chile, S.A., Gold
Fields Mining Corporation, Gold Fields Operating Co.--Ortiz, Grand Eagle Mining,
Inc., Hayden Gulch Terminal, Inc., Highland Mining Co., Hillside Mining Company,
Independence Material Handling Company, Interior Holdings Corp., James River
Coal Terminal Company, Juniper Coal Company, Kayenta Mobile Home Park, Inc.,
Martinka Coal Company, Midco Supply and Equipment Corporation, Mountain View
Coal Company, North Page Coal Corp., Ohio County Coal Company, Patriot Coal
Company L.P., Peabody America, Inc., Peabody Coal Company, Peabody COALSALES
Company, Peabody COALTRADE, Inc., Peabody Coal Company, Peabody Development
Company, Peabody Development Land Holdings, LLC, Peabody Energy Solutions, Inc.,
Peabody Holding Company, Inc., Peabody Natural Gas, LLC, Peabody Natural
Resources Company, Peabody Southwestern Coal Company, Peabody Terminals, Inc.,
Peabody Venezuela Coal Corp., Peabody Western Coal Company, Pine Ridge Coal
Company, Porcupine Productions, LLC, Porcupine Transportation, LLC, Powder River
Coal Company, Rio Escondido Coal Corp., Rivers Edge Mining, Inc., Riverview
Terminal Company, Seneca Coal Company, Sentry Mining Company, Snowberry Land
Company, Sterling Smokeless Coal Company and Thoroughbred, L.L.C.
The senior subordinated note indenture provides that no senior
subordinated note guarantor may consolidate with or merge with or into (whether
or not such senior subordinated note guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such senior
subordinated note guarantor unless (1) subject to the provisions of the
following paragraph, the Person formed by or surviving any such consolidation or
merger (if other than such senior subordinated note guarantor) assumes all the
obligations of such senior subordinated note guarantor under a supplemental
indenture in form and substance reasonably satisfactory to the senior
subordinated note trustee, under the senior subordinated notes, the senior
subordinated note indenture and the Senior Subordinated Registration Rights
Agreement; (2) immediately after giving effect to such transaction, no Default
or Event of Default exists; and (3) our company would be permitted by virtue of
our company's pro forma Fixed Charge Coverage Ratio, immediately after giving
effect to such transaction, to incur at least $1.00 of additional Indebtedness
under the Fixed Charge Coverage Ratio test contained in the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock."
The senior subordinated note indenture provides that in the event of (a) a
sale or other disposition of all of the assets of any senior subordinated note
guarantor, by way of merger, consolidation or otherwise, (b) a sale or other
disposition of all of the capital stock of any senior subordinated note
guarantor or (c) the designation of a senior subordinated note guarantor as an
Unrestricted Subsidiary in accordance with the terms of the senior subordinated
note indenture, then such senior subordinated note guarantor (in the event of a
sale or other disposition, by way of such a merger, consolidation or otherwise,
of all of the capital stock of such senior subordinated note guarantor) or the
corporation acquiring the property (in the event of a sale or other disposition
of all of the assets of such senior subordinated note guarantor) will be
released and relieved of any obligations under its senior subordinated note
guarantee; provided that the Net Proceeds of any such sale or other disposition
are applied in accordance with the applicable provisions of the senior
subordinated note indenture and any such designation of a senior subordinated
note guarantor as an Unrestricted Subsidiary complies with all applicable
covenants. See "--Repurchase at the Option of Holders--Asset Sales."
"Senior subordinated note guarantors" means each of (1) our company's
Domestic Subsidiaries at the date of the closing of the acquisition, other than
Citizens Power and the Subsidiaries of Citizens Power at the date of the senior
subordinated note indenture and (2) any other subsidiary that executes a senior
subordinated Guarantee in accordance with the provisions of the senior
subordinated note indenture, and their respective successors and assigns.
43
Optional Redemption
The senior subordinated notes are subject to redemption at any time at the
option of our company, in whole or in part, upon not less than 30 nor more than
60 days' notice.
Prior to May 15, 2003, the senior subordinated notes will be redeemable at
a redemption price equal to 100% of the principal amount thereof plus the
applicable Senior Subordinated Notes Make Whole Premium, plus, to the extent not
included in the Senior Subordinated Notes Make Whole Premium, accrued and unpaid
interest and Liquidated Damages, if any, to the date of redemption. For purposes
of the foregoing, "Senior Subordinated Notes Make Whole Premium" means, with
respect to a senior subordinated note, an amount equal to the greater of (a)
104.813% of the outstanding principal amount of such senior subordinated note
and (b) the excess of (1) the present value of the remaining interest, premium,
if any, and principal payments due on such senior subordinated note as if such
senior subordinated note were redeemed on May 15, 2003, computed using a
discount rate equal to the Treasury Rate plus 50 basis points, over (2) the
outstanding principal amount of such senior subordinated note.
On or after May 15, 2003, the senior subordinated notes are redeemable at
the redemption prices (expressed as percentages of principal amount) provided
below plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on May 15 of the years indicated below:
Year Percentage
---- ----------
2003 104.813%
2004 103.208%
2005 101.604%
2006 and thereafter 100.000%
Selection and Notice
If less than all of the senior subordinated notes are to be redeemed or
purchased in an offer to purchase at any time, selection of senior subordinated
notes for redemption or purchase will be made by the senior subordinated note
trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the senior subordinated notes are listed, or, if the
senior subordinated notes are not so listed, on a pro rata basis, by lot or by
such method as the senior subordinated note trustee shall deem fair and
appropriate; provided that no senior subordinated notes of $1,000 or less shall
be redeemed in part. Notices of redemption shall be mailed by first class mail
at least 30 but not more than 60 days before the redemption date to each holder
of senior subordinated notes to be redeemed at its registered address. Notices
of redemption may not be conditional. If any senior subordinated note is to be
redeemed in part only, the notice of redemption that relates to such senior
subordinated note shall state the portion of the principal amount thereof to be
redeemed. A new senior subordinated note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original senior subordinated note. Senior subordinated notes
called for redemption become due on the date fixed for redemption. On and after
the redemption date, interest ceases to accrue on senior subordinated notes or
portions of them called for redemption.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each holder of senior
subordinated notes will have the right to require our company to repurchase all
or any part (equal to $1,000 or an integral multiple thereof) of such holder's
senior subordinated notes pursuant to the offer described below (the "Change of
Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase (the "Change of Control Payment").
Within ten days following any Change of Control, our company will mail a notice
to each holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase senior subordinated notes on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), under the procedures required by the senior subordinated
note indenture and described in such notice. Our company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the senior subordinated notes as
a result of a Change of Control.
44
On the Change of Control Payment Date, our company will, to the extent
lawful, (1) accept for payment all senior subordinated notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
senior subordinated notes or portions thereof so tendered and (3) deliver or
cause to be delivered to the senior subordinated note trustee the senior
subordinated notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of senior subordinated notes or portions thereof
being purchased by our company. The Paying Agent will promptly mail to each
holder of senior subordinated notes so tendered the Change of Control Payment
for such senior subordinated notes, and the senior subordinated note trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each holder a new senior subordinated note equal in principal amount to any
unpurchased portion of the senior subordinated notes surrendered, if any;
provided that each such new senior subordinated note will be in a principal
amount of $1,000 or an integral multiple thereof. The senior subordinated note
indenture will provide that, prior to complying with the provisions of this
covenant, but in any event within 90 days following a Change of Control, our
company will either repay all outstanding Senior Debt other than the senior
notes or obtain the requisite consents, if any, under all agreements governing
outstanding Senior Debt other than the senior notes to permit the repurchase of
senior subordinated notes required by this covenant. With respect to the senior
subordinated notes, our company may effect a Change of Control under the terms
of the senior subordinated note indenture; provided that our company complies
with the provisions of the senior note indenture under the covenant described
under "Description of the Senior Notes--Repurchase at the Option of
Holders--Change of Control." The company will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the senior subordinated note indenture
are applicable. Except as described above with respect to a Change of Control,
the senior subordinated note indenture does not contain provisions that permit
the holders of the senior subordinated notes to require that our company
repurchase or redeem the senior subordinated notes in the event of a takeover,
recapitalization or similar transaction.
Our company's other senior indebtedness contains prohibitions on certain
events that would constitute a Change of Control. In addition, the exercise by
the holders of senior subordinated notes of their right to require our company
to repurchase the senior subordinated notes could cause a default under such
other senior indebtedness, even if the Change of Control itself does not, due to
the financial effect of such repurchases on our company. Finally, our company's
ability to pay cash to the holders of senior subordinated notes upon a
repurchase may be limited by our company's then existing financial resources.
See "Risk Factors--Risks Relating to the Notes--Our Ability to Offer to Purchase
Your Notes in the Event of a Change of Control may be Limited."
The Senior Credit Facilities currently prohibit our company from
purchasing any senior notes or senior subordinated notes, and also provide that
certain change of control events with respect to our company would constitute a
default thereunder. Any future credit agreements or other agreements relating to
Senior Debt to which our company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when our company is prohibited from purchasing senior subordinated notes, our
company could seek the consent of its lenders to the purchase of senior
subordinated notes or could attempt to refinance the borrowings that contain
such prohibition. If our company does not obtain such a consent or repay such
borrowings, our company will remain prohibited from purchasing senior
subordinated notes. In such case, our company's failure to purchase tendered
senior subordinated notes would constitute an Event of Default under the senior
subordinated note indenture which would, in turn, constitute a default under the
Senior Credit Facilities. In such circumstances, the subordination provisions in
the senior subordinated note indenture would likely restrict payments to the
holders of senior subordinated notes. See "--Subordination."
Our company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements contained
in the senior subordinated note indenture applicable to a Change of Control
Offer made by our company and purchases all senior subordinated notes validly
tendered and not withdrawn under such Change of Control Offer or if our company
exercises its option to purchase the senior subordinated notes.
"Change of Control" means the occurrence of any of the following: (1) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of our company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than a Principal or a Related Party of a Principal (as
defined below), (2) the adoption of a plan relating to the liquidation or
dissolution of our company, (3) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such
45
person has the right to acquire, whether such right is currently exercisable or
is exercisable only upon the occurrence of a subsequent condition), directly or
indirectly, of more than 50% of the Voting Stock of our company (measured by
voting power rather than number of shares) or (4) the first day on which a
majority of the members of the Board of Directors of our company are not
Continuing Directors.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of our company and its Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of senior
subordinated notes to require our company to repurchase such senior subordinated
notes as a result of a sale, lease, transfer, conveyance or other disposition of
less than all of the assets of our company and its Subsidiaries taken as a whole
to another Person or group may be uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of our company who (1) was a member of such Board of
Directors on the date of the closing of the Acquisition or (2) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Principals" means Lehman Brothers Merchant Banking Partners II L.P., any
of its respective Affiliates and executive officers of our company as of the
date of the closing of the Acquisition.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A).
Asset Sales
The senior subordinated note indenture provides that our company will not,
and will not permit any of its Restricted Subsidiaries to, consummate an Asset
Sale unless (1) our company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the fair
market value as determined in good faith by our company (evidenced by a
resolution of the Board of Directors described in an Officers' Certificate
delivered to the senior subordinated note trustee with respect to any Asset Sale
determined to have a value greater that $25.0 million) of the assets or Equity
Interests issued or sold or otherwise disposed of and (2) at least 75% of the
consideration therefor received by our company or such Subsidiary is in the form
of cash, Cash Equivalents or Marketable Securities; provided that the following
amounts shall be deemed to be cash: (w) any liabilities (as shown on our
company's or such Restricted Subsidiary's most recent balance sheet) of our
company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the senior subordinated
notes or any guarantee thereof) that are assumed by the transferee of any such
assets under a customary novation agreement that releases our company or such
Restricted Subsidiary from further liability, (x) any securities, notes or other
obligations received by our company or any such Restricted Subsidiary from such
transferee that are converted by our company or such Restricted Subsidiary into
cash within 180 days following the closing of such Asset Sale (to the extent of
the cash received), (y) any Designated Noncash Consideration received by our
company or any of its Restricted Subsidiaries in such Asset Sale; provided that
the aggregate fair market value (as determined above) of such Designated Noncash
Consideration, taken together with the fair market value at the time of receipt
of all other Designated Noncash Consideration received pursuant to this clause
(y) less the amount of Net Proceeds previously realized in cash from prior
Designated Noncash Consideration is less than 5% of Total Assets at the time of
the receipt of such Designated Noncash Consideration (with the fair market value
of each item of Designated Noncash Consideration being measured at the time
received and without giving effect to subsequent changes in value) and (z)
Additional Assets received in an exchange of assets transaction.
Within 360 days after the receipt of any cash Net Proceeds from an Asset
Sale, our company or such Restricted Subsidiary, at its option, may apply such
cash Net Proceeds, at its option, (a) to repay Senior Debt of our company or any
Restricted Subsidiary including, without limitation, Indebtedness under a Credit
Facility and the senior notes, (b) to the Acquisition of a majority of the
assets of, or a majority of the Voting Stock of, another Permitted Business, the
making of a capital expenditure or the Acquisition of other assets or
Investments that are used or useful in a Permitted Business or (c) to apply the
cash Net Proceeds from such Asset Sale to an Investment in Additional Assets.
Any cash Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15.0
million, our company will be required to make an offer to all holders of senior
subordinated notes and all holders of other Indebtedness that is not Senior Debt
containing
46
provisions similar to those contained in the senior subordinated note indenture
with respect to offers to purchase or redeem with the proceeds of sales of
assets (an "Asset Sale Offer") to purchase the maximum principal amount of
senior subordinated notes and such other Indebtedness that may be purchased out
of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase, in accordance with the
procedures contained in the senior subordinated note indenture and such other
Indebtedness. To the extent that any Excess Proceeds remain after consummation
of an Asset Sale Offer, our company may use such Excess Proceeds for any purpose
not otherwise prohibited by the senior subordinated note indenture. If the
aggregate principal amount of senior subordinated notes and such other
Indebtedness tendered into such Asset Sale Offer surrendered by holders thereof
exceeds the amount of Excess Proceeds, the senior subordinated note trustee
shall select the senior subordinated notes and such other Indebtedness to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
Covenants
Restricted Payments
The senior subordinated note indenture provides that our company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly: (1) declare or pay any dividend or make any other payment or
distribution on account of our company's or any of its Restricted Subsidiaries'
Equity Interests (including, without limitation, any payment in connection with
any merger or consolidation involving our company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of our company's or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such (other
than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of our company); (2) purchase, redeem or otherwise acquire
or retire for value (including, without limitation, in connection with any
merger or consolidation involving our company) any Equity Interests of our
company or any direct or indirect parent of our company; (3) make any payment on
or with respect to, or purchase, redeem, defease or otherwise acquire or retire
for value any Indebtedness that is subordinated to the senior subordinated notes
or any senior subordinated guarantee, except a payment of interest or principal
at Stated Maturity or Indebtedness permitted under clause (8) of the covenant
described under "--Incurrence of Indebtedness and Issuance of Preferred Stock;"
or (4) make any Restricted Investment (all such payments and other actions
contained in clauses (1) through (4) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) our company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have
been permitted to incur at least $1.00 of additional Indebtedness under
the Fixed Charge Coverage Ratio test described in the first paragraph of
the covenant described below under caption "--Incurrence of Indebtedness
and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by our company and its Subsidiaries after
the date of the closing of the Acquisition (excluding Restricted Payments
permitted by clauses (2), (3), (4), (5), and (9) of the next succeeding
paragraph), is less than the sum, without duplication, of (1) 50% of the
Consolidated Net Income of our company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the closing of the Acquisition to the end of
our company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (2) 100% of the aggregate net cash proceeds or
the fair market value of property other than cash received by our company
since the date of the closing of the Acquisition as a contribution to its
common equity capital or from the issue or sale of Equity Interests of our
company (other than Disqualified Stock) or from the issue or sale of
Disqualified Stock or debt securities of our company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
our company), plus (3) to the extent that either any Existing Citizens
Power Investment or any Restricted Investment that reduced the amount
available for Restricted Payments under this clause (c) is sold for cash or
otherwise liquidated or repaid for cash or any dividend or payment is
received by our company or a Restricted Subsidiary after the date of the
closing of the Acquisition in respect of such Investment, 100% of the
amount of Net Proceeds or dividends or payments (including the fair market
value of property) received in connection therewith, up to the amount of
the Existing Citizens Power Investment on the date of the closing of the
Acquisition or the Restricted Investment that reduced this clause (c), as
the case may be, and thereafter 50% of the amount of Net Proceeds or
47
dividends or payments (including the fair market value of property)
received in connection therewith (except that the amount of dividends or
payments received in respect of payments of Obligations in respect of such
Investments, such as taxes, shall not increase the amounts under this
clause (c)), plus (4) to the extent that any Unrestricted Subsidiary of
our company is redesignated as a Restricted Subsidiary after the date of
the closing of the Acquisition, 100% of the fair market value of our
company's Investment in such Subsidiary as of the date of such
redesignation up to the amount of the Restricted Investments made in such
Subsidiary that reduced this clause (c) and 50% of the excess of the fair
market value of our company's Investment in such Subsidiary as of the date
of such redesignation over (i) the amount of the Restricted Investment
that reduced this clause (c) and (ii) any amounts that increased the
amount available as a Permitted Investment; provided, further, that if
Citizens Power or any of its Subsidiaries is designated as a Restricted
Subsidiary, the amount of the fair market value of the Investment therein
on the date of the senior subordinated note indenture shall also be
credited to this clause (c); provided, further, that any amounts that
increase this clause (c) shall not duplicatively increase amounts
available as Permitted Investments.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the senior subordinated note
indenture;
(2) the redemption, repurchase, retirement, defeasance or other
Acquisition of any subordinated Indebtedness or Equity Interests of our
company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of
our company) of, other Equity Interests of our company (other than any
Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other Acquisition shall be excluded from clause
(c)(2) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other Acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(4) dividends or distributions by a Restricted Subsidiary of our
company so long as, in the case of any dividend or distribution payable on
or in respect of any class or series of securities issued by a Restricted
Subsidiary, our company or a Restricted Subsidiary receives at least its
pro rata share of such dividend or distribution in accordance with its
Equity Interests in such class or series of securities;
(5) Investments in Unrestricted Subsidiaries having an aggregate
fair market value not to exceed the amount, at the time of such
Investment, substantially concurrently contributed in cash or Cash
Equivalents to the common equity capital of our company after the date of
the closing of the acquisition; provided that any such amount contributed
shall be excluded from the calculation made pursuant to clause (c) above;
(6) the payment of dividends on our company's common stock,
following the first public offering of our company's common stock after
the date of the closing of the acquisition, of up to 6% per annum of the
net proceeds received by our company in such public offering, other than
public offerings with respect to our company's common stock registered on
Form S-8;
(7) the repurchase, redemption or other Acquisition or retirement
for value of any Equity Interests of our company or any Restricted
Subsidiary of our company held by any present or former employee or
director of our company (or any of its Restricted Subsidiaries) under any
management equity subscription agreement or stock option agreement or any
other management or employee benefit plan in effect as of the date of the
closing of the Acquisition; provided that (A) the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests shall
not exceed $2.0 million in any twelve-month period (with unused amounts in
any calendar year being carried over to succeeding calendar years subject
to a maximum (without giving effect to the following proviso) of $5.0
million in any calendar year); provided further that such amount in any
calendar year may be increased by an amount not to exceed (x) the cash
proceeds from the sale of Equity Interests of our company or a Restricted
Subsidiary to members of management and directors of our company and its
Subsidiaries that occurs after the date of the closing of the Acquisition,
plus (y) the cash proceeds of key-man life insurance policies received by
our company and its Restricted Subsidiaries after the date of the closing
of the Acquisition, less (z) the amount of any Restricted Payments
previously made pursuant to clauses (x) and (y) of this subparagraph (7);
and, provided further, that cancellation of Indebtedness owing to our
company from members of management of our company or any of its Restricted
Subsidiaries in connection with a repurchase of Equity Interests of our
company or a Restricted Subsidiary will not be deemed to constitute a
Restricted Payment for purposes of this covenant or any other
48
provision of the senior subordinated note indenture and (B) no Default or
Event of Default shall have occurred and be continuing immediately after
such transaction;
(8) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise
price of such options; and
(9) other Restricted Payments not otherwise prohibited by this
covenant in an aggregate amount not to exceed $25.0 million under this
clause (9).
All of our company's Subsidiaries other than Citizens Power and its
Subsidiaries are Restricted Subsidiaries. The Board of Directors may designate
any Restricted Subsidiary to be an Unrestricted Subsidiary if such designation
would not cause a Default. For purposes of making such determination, all
outstanding Investments by our company and its Restricted Subsidiaries (except
to the extent repaid in cash) in the Subsidiary so designated will be deemed to
be Restricted Payments at the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
covenant. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the fair market value of such Investments at
the time of such designation. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
If, at any time, any Unrestricted Subsidiary would fail to meet the
requirements in the definition of "Unrestricted Subsidiary" as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the senior subordinated note indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of our
company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock," our company
shall be in default of such covenant). The Board of Directors of our company may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of our company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (1) such Indebtedness is permitted under the covenant described
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock," calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period, and (2) no Default or Event
of Default would be in existence following such designation.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by our company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any noncash Restricted Payment or any adjustment made pursuant
to paragraph (c) of this covenant shall be determined by the Board of Directors
whose resolution with respect thereto shall be delivered to the senior
subordinated note trustee, such determination to be based upon an opinion or
appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair market value exceeds $25.0 million. Not later
than the date of making any Restricted Payment, our company shall deliver to the
senior subordinated note trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed.
If any Restricted Investment is sold or otherwise liquidated or repaid or
any dividend or payment is received by our company or a Restricted Subsidiary
and such amounts may be credited to clause (c) above, then such amounts will be
credited only to the extent of amounts not otherwise included in Consolidated
Net Income and that do not otherwise increase the amount available as a
Permitted Investment.
Incurrence of Indebtedness and Issuance of Preferred Stock
The senior subordinated note indenture provides that our company will not,
and will not permit any of its Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that our company will not issue any
Disqualified Stock and will not permit any of its Subsidiaries to issue any
shares of preferred stock; provided, however, that our company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and
our company's Restricted Subsidiaries may incur Indebtedness or issue
Disqualified Stock or preferred stock if the Fixed Charge Coverage Ratio for our
company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 2.0 to 1.0, determined on a pro forma
basis (including a pro forma
49
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock or preferred stock had been issued,
as the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by our company of term Indebtedness under Credit
Facilities (and the guarantee thereof by the senior subordinated note
guarantors); provided that the aggregate principal amount of all term
Indebtedness outstanding under this clause (1) after giving effect to such
incurrence does not exceed an amount equal to $920.0 million;
(2) the incurrence by our company of revolving credit Indebtedness
and letters of credit (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of our company
and its Restricted Subsidiaries thereunder) under Credit Facilities (and
the guarantee thereof by the senior subordinated note guarantors);
provided that the aggregate principal amount of all revolving credit
Indebtedness outstanding under this clause (2) after giving effect to such
incurrence does not exceed an amount equal to $480.0 million;
(3) the incurrence by our company and its Restricted Subsidiaries of
the Existing Indebtedness;
(4) the incurrence by our company, the senior subordinated note
guarantors and the senior note guarantors of Indebtedness represented by
the senior notes, the senior subordinated notes, the senior subordinated
note guarantees and the senior subordinated note guarantees limited in
aggregate principal amount, without duplication, to amounts outstanding
under the senior note indenture and the senior subordinated note indenture
as of their respective dates;
(5) (A) the guarantee by our company or any of the senior
subordinated note guarantors of Indebtedness of our company or a
Restricted Subsidiary of our company or (B) the incurrence of Indebtedness
of a Restricted Subsidiary to the extent that such Indebtedness is
supported by a letter of credit, in each case that was permitted to be
incurred by another provision of this covenant;
(6) the incurrence by our company or any of its Restricted
Subsidiaries of Indebtedness (including Capital Lease Obligations) to
finance the Acquisition (including by direct purchase, by lease or
indirectly by the Acquisition of the capital stock of a Person that
becomes a Restricted Subsidiary as a result of such Acquisition) or
improvement of property (real or personal) in an aggregate principal
amount which, when aggregated with the principal amount of all other
Indebtedness then outstanding pursuant to this clause (6) and including
all Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (6), does not
exceed an amount equal to 5% of Total Assets at the time of such
incurrence;
(7) the incurrence by our company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted by
the senior subordinated note indenture to be incurred under the first
paragraph hereof or clauses (3), (4) or (7) of this paragraph;
(8) the incurrence by our company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among our company and
any of its Restricted Subsidiaries; provided, however, that (1) if our
company is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the senior subordinated notes and (2)(A) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than our company or a
Restricted Subsidiary thereof and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either our company or a
Restricted Subsidiary thereof shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by our company or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause (8);
(9) the incurrence by our company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred in the ordinary
course of business for the purpose of risk management and not for the
purpose of speculation;
(10) the incurrence by our company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of our company that was not permitted by this clause (10), and
the issuance of preferred stock by Unrestricted Subsidiaries;
50
(11) the incurrence of Indebtedness solely in respect of
performance, surety and similar bonds or completion or performance
guarantees (including, without limitation, performance guarantees under
coal supply agreements or equipment leases), to the extent that such
incurrence does not result in the incurrence of any obligation for the
payment of borrowed money to others;
(12) the incurrence of Indebtedness arising from agreements of our
company or a Restricted Subsidiary providing for indemnification,
adjustment of purchase price or similar obligations, in each case,
incurred or assumed in connection with the disposition of any business,
assets or a Subsidiary; provided, however that (1) such Indebtedness is
not reflected on the balance sheet of our company or any Restricted
Subsidiary (contingent obligations referred to in a footnote to financial
statements and not otherwise reflected on the balance sheet will not be
deemed to be reflected on such balance sheet for purposes of this clause
(1)) and (2) the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds including noncash
proceeds (the fair market value of such noncash proceeds being measured at
the time received and without giving effect to any subsequent changes in
value) actually received by our company and its Restricted Subsidiaries in
connection with such disposition;
(13) the guarantee by our company or any of the senior subordinated
note guarantors of additional Indebtedness relating to Black Beauty Coal
Company not to exceed $50.0 million in aggregate principal amount
outstanding at any one time under this clause (13);
(14) the incurrence of Indebtedness relating to the Bengalla Joint
Venture or the Warkworth Associates Joint Venture in an aggregate amount
not to exceed $100.0 million in aggregate principal amount outstanding at
any one time under this clause (14); and
(15) the incurrence by our company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (15), not to
exceed $250.0 million.
(16) For purposes of determining compliance with this covenant, in
the event that an item of Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (1) through (15)
above or is entitled to be incurred pursuant to the first paragraph of
this covenant, our company shall, in its sole discretion, classify or
reclassify such item of Indebtedness in any manner that complies with this
covenant. Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class
of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this
covenant; provided, in each such case, that the amount thereof is included
in Fixed Charges of our company as accrued.
Liens
The senior subordinated note indenture provides that our company will not
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind securing Indebtedness or trade payables
(other than Permitted Liens) upon any of their property or assets, now owned or
hereafter acquired, unless all payments due under the senior subordinated note
indenture and the senior subordinated notes are secured on an equal and ratable
basis with the obligations so secured until such time as such obligations are no
longer secured by a Lien.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The senior subordinated note indenture provides that our company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary that is
not a senior subordinated note guarantor to (1)(a) pay dividends or make any
other distributions to our company or any of its Restricted Subsidiaries (i) on
its capital stock or (ii) with respect to any other interest or participation
in, or measured by, its profits, or (b) pay any indebtedness owed to our company
or any of its Restricted Subsidiaries, (2) make loans or advances to our company
or any of its Restricted Subsidiaries or (3) transfer any of its properties or
assets to our company or any of its Restricted Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
closing of the Acquisition, (b) the Senior Credit Facilities as in effect as of
the date of the closing of the Acquisition, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings
51
thereof, provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacement or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other payment
restrictions than those contained in the Senior Credit Facilities as in effect
on the date of the closing of the Acquisition, (c) the senior note indenture,
the senior subordinated note indenture, the senior notes and the senior
subordinated notes, (d) applicable law or any applicable rule, regulation or
order, (e) any instrument governing Indebtedness or capital stock of a Person
acquired by our company or any of its Restricted Subsidiaries as in effect at
the time of such Acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such Acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the senior subordinated note
indenture to be incurred, (f) customary non-assignment provisions in leases and
other agreements entered into in the ordinary course of business and consistent
with past practices, (g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (3) above on the property so acquired, (h) any agreement for the sale of
a Restricted Subsidiary that restricts distributions by that Restricted
Subsidiary pending its sale, (i) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced, (j)
secured Indebtedness otherwise permitted to be incurred under the provisions of
the covenant described above under the caption "--Liens" that limits the right
of the debtor to dispose of the assets securing such Indebtedness, (k)
provisions with respect to the disposition or distribution of assets or property
in joint venture agreements and other similar agreements entered into in the
ordinary course of business, (l) restrictions on cash or other deposits or net
worth imposed by customers or lessors under contracts or leases entered into in
the ordinary course of business and (m) any encumbrances or restrictions imposed
by any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings of the contracts,
instruments or obligations referred to in clauses (a) through (l) above,
provided that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are, in the good faith
judgment of our company's Board of Directors, not materially more restrictive in
the aggregate with respect to such dividend and other payment restrictions than
those (considered as a whole) contained in the dividend or other payment
restrictions prior to such amendment, modification, restatement, renewal,
increase, supplement, refunding, replacement or refinancing.
Merger, Consolidation, or Sale of Assets
The senior subordinated note indenture provides that our company may not
consolidate or merge with or into (whether or not our company is the surviving
corporation), or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless (1) our company is
the surviving corporation or the entity or the Person formed by or surviving any
such consolidation or merger (if other than our company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (2) the entity or Person formed
by or surviving any such consolidation or merger (if other than our company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of our
company under the Senior Subordinated Registration Rights Agreement, the senior
subordinated notes and the senior subordinated note indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the senior
subordinated note trustee; (3) immediately after such transaction no Default or
Event of Default exists; and (4) except in the case of a merger of our company
with or into a Wholly Owned Restricted Subsidiary of our company, immediately
after giving pro forma effect to such transaction, as if such transaction had
occurred at the beginning of the applicable four-quarter period, (A) the entity
surviving such consolidation or merger would be permitted to incur at least
$1.00 of additional Indebtedness under the Fixed Charge Coverage Ratio test
contained in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock" or (B)
the Fixed Charge Coverage Ratio for our company or the entity or Person formed
by or surviving any such consolidation or merger (if other than our company), or
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made would, immediately after giving pro forma effect thereto as
if such transaction had occurred at the beginning of the applicable four-quarter
period, not be less than such Fixed Charge Coverage Ratio for our company and
its Restricted Subsidiaries immediately prior to such transaction. The senior
subordinated note indenture also provides that our company may not, directly or
indirectly, lease all or substantially all of its properties or assets, in one
or more related transactions, to any other Person. The provisions of this
covenant will not be applicable to a sale, assignment, transfer, conveyance or
other disposition of assets between or among our company and its Restricted
Subsidiaries.
Notwithstanding the foregoing clause (4), (1) any Restricted Subsidiary
may consolidate with, merge into or transfer all or part of its properties and
assets to our company and (2) our company may merge with an Affiliate that has
no significant assets or liabilities and was formed solely for the purpose of
changing the jurisdiction of organization of our company in
52
another State of the United States or the form of organization of our company so
long as the amount of Indebtedness of our company and its Restricted
Subsidiaries is not increased thereby and provided that the successor assumes
all the obligations of our company under the Senior Subordinated Registration
Rights Agreement, the senior subordinated notes and the senior subordinated note
indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the senior subordinated note trustee.
Transactions with Affiliates
The senior subordinated note indenture provides that our company will not,
and will not permit any of its Restricted Subsidiaries to, make any payment to,
or sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction") involving aggregate payments or consideration in excess of $5.0
million, unless (1) such Affiliate Transaction is on terms that are materially
no less favorable to our company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by our company
or such Restricted Subsidiary with an unrelated Person and (2) our company
delivers to the senior subordinated note trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, a resolution of the Board of
Directors contained in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (1) above and that such Affiliate Transaction
has been approved by a majority of the members of the Board of Directors and (b)
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $25.0 million, an
opinion as to the fairness to the holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing.
Notwithstanding the foregoing, the following items shall not be deemed to
be Affiliate Transactions: (1) any employment agreement or other compensation
plan or arrangement for employees entered into by our company or any of its
Restricted Subsidiaries in the ordinary course of business and consistent with
the past practice of our company or such Restricted Subsidiary; (2) transactions
between or among our company and/or its Restricted Subsidiaries; (3) payment of
reasonable fees to officers, directors, employees or consultants of our company;
(4) Restricted Payments that are permitted by, and Investments that are not
prohibited by, the provisions of the senior subordinated note indenture
described above under the caption "--Restricted Payments;" (5) indemnification
payments made to officers, directors and employees of our company or any
Restricted Subsidiary under charter, bylaw, statutory or contractual provisions;
(6) the payment of customary annual management, consulting and advisory fees and
related expenses to Lehman Merchant Bank and its Affiliates; (7) payments by our
company or any of its Restricted Subsidiaries to Lehman Merchant Bank and its
Affiliates made for any financial advisory, financing, underwriting or placement
services or in respect of other investment banking activities, including,
without limitation, in connection with Acquisitions or divestitures which
payments are approved by a majority of the Board of Directors of our company in
good faith; (8) the existence of, or the performance by our company or any of
its Restricted Subsidiaries of its obligations under the terms of, any
stockholders' agreement (including any registration rights agreement or purchase
agreement related thereto) to which it is a party as of the date of the closing
of the Acquisition and any similar agreements which it may enter into
thereafter; provided, however, that the existence of, or the performance by our
company or any of its Restricted Subsidiaries of obligations under any future
amendment to any such existing agreement or under any similar agreement entered
into after the date of the closing of the Acquisition shall only be permitted by
this clause (8) to the extent that the terms of any such amendment or new
agreement are not otherwise disadvantageous to the holders in any material
respect; (9) transactions under the terms of the Transaction Documents in effect
on the date of the closing of the Acquisition; (10) transactions with
Unrestricted Subsidiaries, customers, clients, suppliers, joint venture partners
or purchasers or sellers of goods or services, in each case in the ordinary
course of business (including, without limitation, under joint venture
agreements) and otherwise in compliance with the terms of the senior
subordinated note indenture which are, in the aggregate (taking into account all
the costs and benefits associated with such transactions), materially no less
favorable to our company or its Restricted Subsidiaries than those that would
have been obtained in a comparable transaction by our company or such Restricted
Subsidiary with an unrelated Person, in the reasonable determination of the
Board of Directors of our company or the senior management thereof, or are on
terms at least as favorable as might reasonably have been obtained at such time
from an unaffiliated party; (11) guarantees of performance by our company and
its Restricted Subsidiaries of Unrestricted Subsidiaries in the ordinary course
of business, except for guarantees of Obligations in respect of borrowed money;
and (12) pledges of Equity Interests of Unrestricted Subsidiaries for the
benefit of lenders of Unrestricted Subsidiaries.
Additional Subordinated Subsidiary Guarantees
The senior subordinated note indenture provides that if our company or any
of its Domestic Subsidiaries shall acquire or create another Domestic Subsidiary
after the date of the senior subordinated note indenture and such Domestic
Subsidiary
53
provides a guarantee of the Senior Credit Facilities, then such newly acquired
or created Domestic Subsidiary shall execute a supplemental indenture in form
and substance satisfactory to the senior subordinated note trustee providing
that such Domestic Subsidiary shall become a senior subordinated note guarantor
under the senior subordinated note indenture, provided, however, that this
covenant shall not apply to any Domestic Subsidiary that has been properly
designated as an Unrestricted Subsidiary in accordance with the senior
subordinated note indenture for so long as it continues to constitute an
Unrestricted Subsidiary.
No Senior Subordinated Debt
The senior subordinated note indenture provides that (1) our company will
not incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any Senior
Debt and senior in any respect in right of payment to the senior subordinated
notes, and (2) no senior subordinated note guarantor will incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to the senior note guarantees and
senior in any respect in right of payment to the senior subordinated note
guarantees.
Business Activities
Our company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to our company and its Restricted Subsidiaries taken as a
whole.
Payments for Consent
The senior subordinated note indenture provides that neither our company
nor any of its Restricted Subsidiaries will, directly or indirectly, pay or
cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any holder of any senior subordinated notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the senior subordinated note indenture or the senior subordinated notes
unless such consideration is offered to be paid or is paid to all holders of the
senior subordinated notes that consent, waive or agree to amend in the time
frame under the solicitation documents relating to such consent, waiver or
agreement.
Reports
The senior subordinated note indenture provides that, whether or not
required by the rules and regulations of the Commission, so long as any senior
subordinated notes are outstanding, our company will furnish to the holders of
senior subordinated notes (1) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if our company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
our company and its consolidated Subsidiaries (showing in reasonable detail,
either on the face of the financial statements or in the footnotes thereto and
in Management's Discussion and Analysis of Financial Condition and Results of
Operations, the financial condition and results of operations of our company and
its Restricted Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of our company) and, with respect to
the annual information only, a report thereon by our company's certified
independent accountants and (2) all current reports that would be required to be
filed with the Commission on Form 8-K if our company were required to file such
reports, in each case within the time periods specified in the Commission's
rules and regulations. In addition, following the consummation of the exchange
offer contemplated by the Senior Subordinated Registration Rights Agreement,
whether or not required by the rules and regulations of the Commission, our
company will file a copy of all such information and reports with the Commission
for public availability within the time periods specified in the Commission's
rules and regulations (unless the Commission will not accept such a filing) and
make such information available to securities analysts and prospective investors
upon request. In addition, our company and the senior subordinated note
guarantors have agreed that, for so long as any senior subordinated notes remain
outstanding, they will furnish to the holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
The senior subordinated note indenture provides that each of the following
constitutes an Event of Default: (1) default for 30 days in the payment when due
of interest on, or Liquidated Damages, if any, with respect to, the senior
subordinated notes (whether or not prohibited by the subordination provisions of
the senior subordinated note indenture); (2) default in payment when due of the
principal of or premium, if any, on the senior subordinated notes (whether or
not prohibited by the subordination provisions of the senior subordinated note
indenture); (3) failure by our company or any of its Subsidiaries to
54
make the offer required or to purchase any of the senior subordinated notes as
required under the provisions described under the captions "--Change of
Control," or "--Asset Sales;" (4) failure by our company or any of its
Subsidiaries for 30 days after notice to comply with the provisions of the
covenants entitled "--Restricted Payments" or "--Incurrence of Indebtedness and
Issuance of Preferred Stock;" or failure by our company or any of its
Subsidiaries for 60 days after notice to comply with any of its other agreements
in the senior subordinated note indenture or the senior subordinated notes; (5)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by our company or any of its Restricted Subsidiaries (or the payment of
which is guaranteed by our company or any of its Restricted Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the date
of the senior subordinated note indenture, which default results in the
acceleration of such Indebtedness prior to its express maturity and the
principal amount of any such Indebtedness aggregates $50.0 million or more; (6)
failure by our company or any of its Restricted Subsidiaries or any group of
Restricted Subsidiaries that, taken as a whole, would be a Significant
Subsidiary to pay final judgments aggregating in excess of $50.0 million, which
judgments are not paid, discharged or stayed for a period of 60 days; (7) except
as permitted by the senior subordinated note indenture, any senior subordinated
note guarantee shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
senior subordinated note guarantor, or any Person acting on behalf of any senior
subordinated note guarantor, shall deny or disaffirm its obligations under its
senior subordinated note guarantee; (8) certain events of bankruptcy or
insolvency with respect to our company, any of its Significant Subsidiaries that
are Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken
as a whole, would be a Significant Subsidiary; and (9) any failure of our
company to deposit the required amounts into the Escrow Account under the Escrow
Letter or any failure of the proceeds of the Escrow Account to be applied as
required under the Escrow Letter.
If any Event of Default occurs and is continuing, the senior subordinated
note trustee or the holders of at least 25% in principal amount of the then
outstanding senior subordinated notes may declare all the senior subordinated
notes to be due and payable immediately; provided, that so long as any
Indebtedness permitted to be incurred under the Senior Credit Facilities shall
be outstanding, such acceleration shall not be effective until the earlier of
(1) an acceleration of any such Indebtedness under the Senior Credit Facilities
or (2) five business days after receipt by our company of written notice of such
acceleration of the senior subordinated notes. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to our company, any Significant Subsidiary that is a
Restricted Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding senior
subordinated notes will become due and payable without further action or notice.
Holders of the senior subordinated notes may not enforce the senior subordinated
note indenture or the senior subordinated notes except as provided in the senior
subordinated note indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding senior subordinated notes
may direct the senior subordinated note trustee in its exercise of any trust or
power. The senior subordinated note trustee may withhold from holders of the
senior subordinated notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of our company with
the intention of avoiding payment of the premium that our company would have had
to pay if our company then had elected to redeem the senior subordinated notes
under the optional redemption provisions of the senior subordinated note
indenture, an equivalent premium shall also become and be immediately due and
payable to the extent permitted by law upon the acceleration of the senior
subordinated notes. If an Event of Default occurs prior to May 15, 2003 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of our company with the intention of avoiding paying the premium upon redemption
of the senior subordinated notes prior to May 15, 2003, then the premium
specified in the senior subordinated note indenture shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the senior subordinated notes.
The holders of a majority in aggregate principal amount of the senior
subordinated notes then outstanding by notice to the senior subordinated note
trustee may on behalf of the holders of all of the senior subordinated notes
waive any existing Default or Event of Default and its consequences under the
senior subordinated note indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the senior
subordinated notes.
Our company is required to deliver to the senior subordinated note trustee
annually a statement regarding compliance with the senior subordinated note
indenture, and our company is required upon becoming aware of any Default or
Event of Default, to deliver to the senior subordinated note trustee a statement
specifying such Default or Event of Default.
55
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of our company
or any Person controlling such Person, as such, shall have any liability for any
obligations of our company under the senior subordinated notes, the senior
subordinated note guarantees, the senior subordinated note indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of senior subordinated notes by accepting a senior
subordinated note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the senior subordinated notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
Legal Defeasance and Covenant Defeasance
Our company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding senior subordinated notes
("Legal Defeasance") except for (1) the rights of holders of outstanding senior
subordinated notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages, if any, on such senior subordinated
notes when such payments are due from the trust referred to below, (2) our
company's obligations with respect to the senior subordinated notes concerning
issuing temporary senior subordinated notes, registration of senior subordinated
notes, mutilated, destroyed, lost or stolen senior subordinated notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (3) the rights, powers, trusts, duties and immunities of the
senior subordinated note trustee, and our company's obligations in connection
therewith and (4) the Legal Defeasance provisions of the senior subordinated
note indenture. In addition, our company may, at its option and at any time,
elect to have the obligations of our company released with respect to certain
covenants that are described in the senior subordinated note indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect to
the senior subordinated notes. In the event Covenant Defeasance occurs, certain
events (not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under "Events of Default" will no longer constitute
an Event of Default with respect to the senior subordinated notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (1)
our company must irrevocably deposit with the senior subordinated note trustee,
in trust, for the benefit of the holders of the senior subordinated notes, cash
in U.S. dollars, non-callable Government Securities, or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium, if
any, and interest and Liquidated Damages, if any, on the outstanding senior
subordinated notes on the stated maturity or on the applicable redemption date,
as the case may be, and our company must specify whether the senior subordinated
notes are being defeased to maturity or to a particular redemption date; (2) in
the case of Legal Defeasance, our company shall have delivered to the senior
subordinated note trustee an opinion of counsel in the United States reasonably
acceptable to the senior subordinated note trustee confirming that (A) our
company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of the senior subordinated note
indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the holders of the outstanding senior subordinated notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred; (3) in the case of Covenant Defeasance,
our company shall have delivered to the senior subordinated note trustee an
opinion of counsel in the United States reasonably acceptable to the senior
subordinated note trustee confirming that the holders of the outstanding senior
subordinated notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Covenant Defeasance had not occurred; (4) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the effective date of the defeasance; (5) such Legal Defeasance
or Covenant Defeasance will not result in a breach or violation of, or
constitute a default under any material agreement or instrument (other than the
senior subordinated note indenture) to which our company or any of its
Subsidiaries is a party or by which our company or any of its Subsidiaries is
bound; (6) our company must have delivered to the senior subordinated note
trustee, at or prior to the effective date of such defeasance, an opinion of
counsel to the effect that at the effective date of such defeasance, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (7) our company must deliver to the senior subordinated note trustee
an Officers' Certificate stating that the deposit was not made by our company
with the intent of preferring the holders of senior subordinated notes over the
other creditors of our company with the intent of defeating, hindering, delaying
or defrauding creditors of our company or others; and (8) our company must
deliver to the senior subordinated note trustee an Officers' Certificate and an
opinion of counsel, each stating
56
that all conditions precedent provided for relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
Transfer and Exchange
A holder may transfer or exchange senior subordinated notes in accordance
with the senior subordinated note indenture. The Registrar and the senior
subordinated note trustee may require a holder, among other things, to furnish
appropriate endorsements and transfer documents and our company may require a
holder to pay any taxes and fees required by law or permitted by the senior
subordinated note indenture. Our company is not required to transfer or exchange
any senior subordinated note selected for redemption. Also, our company is not
required to transfer or exchange any senior subordinated note for a period of 15
days before a selection of senior subordinated notes to be redeemed.
The registered holder of a senior subordinated note will be treated as the
owner of it for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the senior
subordinated note indenture or the senior subordinated notes may be amended or
supplemented with the consent of the holders of at least a majority in principal
amount of the senior subordinated notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, senior subordinated notes), and any existing default or
compliance with any provision of the senior subordinated note indenture or the
senior subordinated notes may be waived with the consent of the holders of a
majority in principal amount of the then outstanding senior subordinated notes
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, senior subordinated notes).
Without the consent of each holder affected, an amendment or waiver may
not (with respect to any senior subordinated notes held by a non-consenting
holder): (1) reduce the principal amount of senior subordinated notes whose
holders must consent to an amendment, supplement or waiver, (2) reduce the
principal of or change the fixed maturity of any senior subordinated note or
alter the provisions with respect to the redemption of the senior subordinated
notes (other than provisions relating to the covenants described above under the
caption "--Repurchase at the Option of Holders"), (3) reduce the rate of or
change the time for payment of interest on any senior subordinated note, (4)
waive a Default or Event of Default in the payment of principal of or premium,
if any, or interest on the senior subordinated notes (except a rescission of
acceleration of the senior subordinated notes by the holders of at least a
majority in aggregate principal amount of the senior subordinated notes and a
waiver of the payment default that resulted from such acceleration), (5) make
any senior subordinated note payable in money other than that stated in the
senior subordinated notes, (6) make any change in the provisions of the senior
subordinated note indenture relating to waivers of past Defaults or the rights
of holders of senior subordinated notes to receive payments of principal of or
premium, if any, or interest on the senior subordinated notes, (7) waive a
redemption payment with respect to any senior subordinated note (other than a
payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders"), (8) make any change in the foregoing
amendment and waiver provisions or (9) release any senior subordinated note
guarantor from any of its obligations under its senior subordinated note
guarantee or the senior subordinated note indenture, except in accordance with
the terms of the senior subordinated note indenture. In addition, any amendment
to the provisions of Article 10 of the senior subordinated note indenture (which
relate to subordination) will require the consent of the holders of at least 75%
in aggregate principal amount of the senior subordinated notes then outstanding
if such amendment would adversely affect the rights of holders of senior
subordinated notes.
Notwithstanding the foregoing, without the consent of any holder of senior
subordinated notes, our company and the senior subordinated note trustee may
amend or supplement the senior subordinated note indenture or the senior
subordinated notes to cure any ambiguity, defect or inconsistency, to provide
for uncertificated senior subordinated notes in addition to or in place of
certificated senior subordinated notes, to provide for the assumption of our
company's obligations to holders of senior subordinated notes in the case of a
merger or consolidation or sale of all or substantially all of our company's
assets, to make any change that would provide any additional rights or benefits
to the holders of senior subordinated notes or that does not adversely affect
the legal rights under the senior subordinated note indenture of any such
holder, to comply with requirements of the Commission in order to effect or
maintain the qualification of the senior subordinated note indenture under the
Trust Indenture Act, to provide for the issuance of additional senior
subordinated notes in accordance with the limitations contained in this senior
subordinated note indenture as of the date hereof or to allow any senior
subordinated note guarantor to execute a supplemental senior subordinated note
indenture and/or a senior subordinated note guarantee with respect to the senior
subordinated notes.
57
Concerning the Senior Subordinated Note Trustee
The senior subordinated note indenture contains certain limitations on the
rights of the senior subordinated note trustee, should it become a creditor of
our company, to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or otherwise.
The senior subordinated note trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The holders of a majority in principal amount of the then outstanding
senior subordinated notes will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
senior subordinated note trustee, subject to certain exceptions. The senior
subordinated note indenture provides that in case an Event of Default shall
occur (which shall not be cured), the senior subordinated note trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such provisions, the senior
subordinated note trustee will be under no obligation to exercise any of its
rights or powers under the senior subordinated note indenture at the request of
any holder of senior subordinated notes, unless such holder shall have offered
to the senior subordinated note trustee security and indemnity satisfactory to
it against any loss, liability or expense.
Book-Entry, Delivery and Form
The certificates representing the senior subordinated notes will be issued
in fully registered form. Except as described in the next paragraph, the senior
subordinated notes initially will be represented by permanent global senior
subordinated notes, in definitive, fully registered form without interest
coupons and will be deposited with the senior subordinated note trustee as
custodian for DTC and registered in the name of a nominee of DTC.
Except as described below, the global senior subordinated notes may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the global senior
subordinated notes may not be exchanged for senior subordinated notes in
certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Senior Subordinated Notes for Certificated Senior
Subordinated Notes." Except in the limited circumstances described below, owners
of beneficial interests in the global senior subordinated notes will not be
entitled to receive physical delivery of certificated senior subordinated notes
(as defined below).
The senior subordinated note trustee will act as Paying Agent and
Registrar. The senior subordinated notes may be presented for registration of
transfer and exchange at the offices of the Registrar.
Depository Procedures
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems and are subject
to changes by them from time to time. Our company takes no responsibility for
these operations and procedures and urges investors to contact the system or
their participants directly to discuss these matters.
DTC has advised our company that DTC is a limited-purpose trust company
created to hold securities for the Participants and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchaser, banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
DTC has also advised our company that, pursuant to procedures established
by it, (i) upon deposit of the global senior subordinated notes, DTC will credit
the accounts of Participants designated by the Initial Purchaser with portions
of the principal amount of the global senior subordinated notes and (ii)
ownership of such interests in the global senior subordinated notes will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the global senior subordinated notes).
Investors in the global senior subordinated notes may hold their interests
therein directly through DTC, if they are Participants in such system, or
indirectly through organizations which are Participants in such system. All
interests in a global
58
senior subordinated note may be subject to the procedures and requirements of
DTC. The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a global senior subordinated note to such
persons will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a global senior
subordinated note to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing such
interests.
Except as described below, owners of interests in the global senior
subordinated note will not have senior subordinated notes registered in their
names, will not receive physical delivery of senior subordinated notes in
certificated form and will not be considered the registered owners or "holders"
thereof under the senior subordinated note indenture for any purpose.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a global senior subordinated note registered in
the name of DTC or its nominee will be payable to DTC in its capacity as the
registered holder under the senior subordinated note indenture. Under the terms
of the senior subordinated note indenture, our company and the senior
subordinated note trustee will treat the persons in whose names the senior
subordinated notes, including the global senior subordinated notes, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither our company,
the senior subordinated note trustee nor any agent of our company or the senior
subordinated note trustee has or will have any responsibility or liability for
(1) any aspect of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of beneficial ownership
interests in the global senior subordinated notes, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
global senior subordinated notes or (2) any other matter relating to the actions
and practices of DTC or any of its Participants or Indirect Participants. DTC
has advised our company that its current practice, upon receipt of any payment
in respect of securities such as the senior subordinated notes (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in the principal amount of beneficial interests in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of senior
subordinated notes will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the senior subordinated
note trustee or our company. Neither our company nor the senior subordinated
note trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the senior subordinated notes, and our
company and the senior subordinated note trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee for all
purposes.
Interests in the global senior subordinated notes are expected to be
eligible to trade in DTC's Same-Day Funds Settlement System and secondary market
trading activity in such interests will, therefore, settle in immediately
available funds, subject in all cases to the rules and procedures of DTC and its
Participants. See "--Same Day Settlement and Payment."
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same day funds.
DTC has advised our company that it will take any action permitted to be
taken by a holder of senior subordinated notes only at the direction of one or
more Participants to whose account DTC has credited the interests in the global
senior subordinated notes and only in respect of such portion of the aggregate
principal amount of the senior subordinated notes as to which such Participant
or Participants has or have given such direction. However, if there is an Event
of Default under the senior subordinated notes, DTC reserves the right to
exchange the global senior subordinated notes for legended senior subordinated
notes in certificated form, and to distribute such senior subordinated notes to
its Participants.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interests in the global senior subordinated notes among
Participants in DTC, it is under no obligation to perform or to continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither our company nor the senior subordinated note trustee nor any of their
respective agents will have any responsibility for the performance by DTC, or
its participants or indirect participants of its obligations under the rules and
procedures governing its operations.
59
Exchange of Book-Entry Senior Subordinated Notes for Certificated
Senior Subordinated Notes
A global senior subordinated note is exchangeable for definitive senior
subordinated notes in registered certificated form ("certificated senior
subordinated notes") if (1) DTC (x) notifies our company that it is unwilling or
unable to continue as depositary for the global senior subordinated notes and
our company thereupon fails to appoint a successor depositary or (y) has ceased
to be a clearing agency registered under the Exchange Act, (2) our company, at
its option, notifies the senior subordinated note trustee in writing that it
elects to cause the issuance of the certificated senior subordinated notes or
(3) there shall have occurred and be continuing a Default or Event of Default
with respect to the senior subordinated notes. In addition, beneficial interests
in a global senior subordinated note may be exchanged for certificated senior
subordinated notes upon request but only upon prior written notice given to the
senior subordinated note trustee by or on behalf of DTC in accordance with the
senior subordinated note indenture. In all cases, certificated senior
subordinated notes delivered in exchange for any global senior subordinated note
or beneficial interests therein will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures) and will bear the applicable
restrictive legend referred to in "Notice to Investors," unless our company
determines otherwise in compliance with applicable law.
Exchange of Certificated Senior Subordinated Notes for Book-Entry
Senior Subordinated Notes
Senior subordinated notes issued in certificated form may be exchanged for
beneficial interests in any global senior subordinated note upon request.
Same Day Settlement and Payment
The senior subordinated note indenture requires that payments in respect
of the senior subordinated notes represented by the global senior subordinated
notes (including principal, premium, if any, interest and Liquidated Damages, if
any) be made by wire transfer of immediately available funds to the accounts
specified by the global senior subordinated note holder. With respect to senior
subordinated notes in certificated form, our company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available funds to the accounts specified by the holders
thereof or, if no such account is specified, by mailing a check to each such
holder's registered address. The senior subordinated notes represented by the
global senior subordinated notes are expected to trade in DTC's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
senior subordinated notes will, therefore, be required by DTC to be settled in
immediately available funds. We expect that secondary trading in any
certificated senior subordinated notes will also be settled in immediately
available funds.
Definitions
The following are defined terms used in the senior subordinated note
indenture. Reference is made to the senior subordinated note indenture for a
full disclosure of all such terms, as well as any other capitalized terms used
herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (1)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (2) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Acquisition" means the Acquisition by our company of: (1) all of the
common stock of Peabody Holding Company, (2) all of the common stock of Gold
Fields Mining Corp., (3) all of the membership interests of Citizens Power, (4)
the 1% interests in CL Hartford, L.L.C., a Delaware limited liability company,
and Citizens Power Sales, a Delaware general partnership.
"Additional Assets" means (1) any property or assets (other than capital
stock, Indebtedness or rights to receive payments over a period greater than 180
days, other than with respect to coal supply contract restructurings) that is
usable by our company or a Restricted Subsidiary in a Permitted Business or (2)
the capital stock of a Person that is at the time, or becomes, a Restricted
Subsidiary as a result of the Acquisition of such capital stock by our company
or another Restricted Subsidiary.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any
60
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Asset Sale" means (1) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of our company and
its Restricted Subsidiaries taken as a whole will be governed by the provisions
of the senior subordinated note indenture described above under the caption
"--Change of Control" and/or the provisions described above under the caption
"--Merger, Consolidation or Sale of Assets" and not by the provisions of the
Asset Sale covenant), and (2) the issue or sale by our company or any of its
Restricted Subsidiaries of Equity Interests of any of our company's Restricted
Subsidiaries, in the case of either clause (1) or (2), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $5.0 million or (b) for Net Proceeds in excess of $5.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (1) a transfer of assets by our company to a Restricted
Subsidiary or by a Restricted Subsidiary to our company or to another Restricted
Subsidiary, (2) an issuance of Equity Interests by a Restricted Subsidiary to
our company or to another Restricted Subsidiary, (3) a Restricted Payment that
is permitted by, or an Investment that is not prohibited by, the covenant
described above under the caption "--Restricted Payments," (4) a disposition of
Cash Equivalents or obsolete equipment, (5) foreclosures on assets, (6) the sale
or discount, in each case without recourse, of accounts receivable arising in
the ordinary course of business, but only in connection with the compromise or
collection thereof and (7) the factoring of accounts receivable arising in the
ordinary course of business under arrangements customary in the industry.
"Bengalla Joint Venture" means Bengalla Mining Co. Pty Limited, Bengalla
Agricultural Co. Pty Limited and Bengalla Coal Sales Co. Pty Ltd. which are the
joint venture companies related to the Bengalla mine in New South Wales,
Australia.
"Black Beauty Coal Company" means the Indiana general partnership among
Thoroughbred, L.L.C., Black Beauty Resources, Inc. and Pittsburg and Midway Coal
Mining Co., and any Person collectively owned by those three partners including,
but not limited to, Eagle Coal Company and Falcon Coal Company.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Cash Equivalents" means (a) securities with maturities of one year or
less from the date of Acquisition issued or fully guaranteed or insured by the
U.S. Government or any agency thereof, (b) certificates of deposit and time
deposits with maturities of one year or less from the date of Acquisition and
overnight bank deposits of any lender under the Senior Credit Facilities or of
any commercial bank having capital and surplus in excess of $500.0 million, (c)
repurchase obligations of any lender under the Senior Credit Facilities or of
any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than 90 days with respect to securities
issued or fully guaranteed or insured by the United States Government, (d)
commercial paper of a domestic issuer rated at least A-2 by S&P or P-2 by
Moody's, or carrying an equivalent rating by a nationally recognized rating
agency if both of S&P and Moody's cease publishing ratings of investments, (e)
securities with maturities of one year or less from the date of Acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which
state, commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A by
Moody's, (f) securities with maturities of one year or less from the date of
Acquisition backed by standby letters of credit issued by any lender under the
Senior Credit Facilities or any commercial bank satisfying the requirements of
clause (b) of this definition or (g) shares of money market mutual or similar
funds which invest exclusively in assets satisfying the requirements of clauses
(a) through (f) of this definition.
"Citizens Power" means Citizens Power LLC, a Delaware limited liability
company and its direct and indirect Subsidiaries.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (1) provision
for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (2) consolidated
interest expense of such Person and its Restricted Subsidiaries for such period,
whether paid or accrued and whether or not capitalized (including, without
limitation, amortization of debt issuance costs, deferred financing fees and
original issue discount, noncash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges
61
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) under Hedging Obligations), to the extent that any such
expense was deducted in computing such Consolidated Net Income, plus (3) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (4) depreciation, depletion, amortization
(including amortization of goodwill and other intangibles) and other noncash
expenses (including, without limitation, writedowns and impairment of property,
plant and equipment and intangibles and other long-lived assets) (excluding any
such noncash expense to the extent that it represents an accrual of or reserve
for cash expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its Restricted Subsidiaries
for such period to the extent that such depreciation, depletion, amortization
and other noncash expenses were deducted in computing such Consolidated Net
Income, minus (5) noncash items increasing such Consolidated Net Income for such
period (other than accruals in accordance with GAAP), plus (6) without
duplication for amounts otherwise included in Consolidated Cash Flow, the amount
of our company's and its Restricted Subsidiaries' proportionate share of the
Consolidated Cash Flow of Black Beauty Coal Company and its Subsidiaries for
such period (calculated in proportion to our company's and its Restricted
Subsidiaries' common equity ownership), in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation, depletion
and amortization and other noncash expenses of, a Restricted Subsidiary that is
not a senior subordinated note guarantor shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent that a corresponding
amount would be permitted at the date of determination to be dividended to our
company by such Restricted Subsidiary without prior governmental approval (that
has not been obtained), and without direct or indirect restriction under the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that (1) the Net Income of any Person that is not a Subsidiary or that
is accounted for by the equity method of accounting shall be included only to
the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Restricted Subsidiary thereof, (2) the Net Income of any
Restricted Subsidiary that is not a senior subordinated note guarantor shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (3) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such Acquisition shall
be excluded, (4) the cumulative effect of a change in accounting principles
shall be excluded, and (5) the Net Income (or loss) of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to our company or one
of its Restricted Subsidiaries.
"Credit Facilities" means, with respect to our company or any of its
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the Senior Credit Facilities) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time. Indebtedness under Credit Facilities outstanding on the
date on which senior subordinated notes are first issued and authenticated under
the senior subordinated note indenture shall be deemed to have been incurred on
such date in reliance on the exception provided by clause (1) of the definition
of Permitted Indebtedness.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Designated Noncash Consideration" means the fair market value of noncash
consideration received by our company or one of its Restricted Subsidiaries in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers' Certificate, setting forth the basis of
such valuation, executed by the principal executive officer and the principal
financial officer of our company, less the amount of cash or Cash Equivalents
received in connection with a sale of such Designated Noncash Consideration.
"Disqualified Stock" means any capital stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, under a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in
part, on or prior to the date that is 91 days after the date on which the senior
subordinated notes mature; provided, however, that any capital stock that would
constitute Disqualified Stock solely because the holders thereof have the
62
right to require our company to repurchase such capital stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such capital stock provide that our company
may not repurchase or redeem any such capital stock under such provisions unless
such repurchase or redemption complies with the covenant described above under
the caption "--Certain Covenants--Restricted Payments."
"Domestic Subsidiary" means a Subsidiary that is (1) formed under the laws
of the United States of America or a state or territory thereof or (2) as of the
date of determination, treated as a domestic entity or a partnership or a
division of a domestic entity for United States federal income tax purposes.
"Equity Interests" means capital stock and all warrants, options or other
rights to acquire capital stock (but excluding any debt security that is
convertible into, or exchangeable for, capital stock).
"Equity Offering" means any public or private sale of equity securities
(excluding Disqualified Stock) of our company, other than any private sales to
an Affiliate of our company.
"Escrow Account" means the escrow account maintained under the Escrow
Letter.
"Escrow Letter" means that certain escrow letter dated March 2, 1998, by
and among Lazard Brothers & Co., Limited, The Energy Group PLC, Peabody
Investments Inc. and Peabody Energy Corporation.
"Existing Citizens Power Investment" means the Investments in Citizens
Power by our company and its Restricted Subsidiaries as of the date of the
closing of the Acquisition.
"Existing Indebtedness" means up to $292.5 million in aggregate principal
amount of Indebtedness of our company and its Restricted Subsidiaries (other
than Indebtedness under the Senior Credit Facilities, the senior notes, the
senior subordinated notes and related guarantees) in existence on the date of
the closing of the Acquisition, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (1) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue discount, noncash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letters of credit or bankers' acceptance financings, and net payments
(if any) under Hedging Obligations, but excluding amortization of debt issuance
costs) and (2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period, and (3) any interest
expense on the portion of Indebtedness of another Person that is guaranteed by
such Person or one of its Restricted Subsidiaries or secured by a Lien on assets
of such Person or one of its Restricted Subsidiaries (whether or not such
guarantee or Lien is called upon) and (4) the product of (a) all dividend
payments, whether or not in cash, on any series of preferred stock of such
Person or any of its Restricted Subsidiaries, other than dividend payments on
Equity Interests payable solely in Equity Interests of our company (other than
Disqualified Stock) or to our company or a Restricted Subsidiary of our company,
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the effective combined federal, state and local tax rate of such
Person for such period, expressed as a decimal, in each case, for our company
and its Restricted Subsidiaries on a consolidated basis and in accordance with
GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person and its
Restricted Subsidiaries for any period, the ratio of the Consolidated Cash Flow
of such Person and its Restricted Subsidiaries for such period to the Fixed
Charges of such Person and its Restricted Subsidiaries for such period. In the
event that the referrent Person or any of its Restricted Subsidiaries incurs,
assumes, guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems preferred stock subsequent to the commencement
of the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (1) Acquisitions that have been made
by our company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions and including
pro forma cost savings permitted by Article 11 of Regulation S-X, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be given pro forma effect as if they had
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (3) of the proviso contained in the definition of Consolidated Net
Income, and (2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of
63
prior to the Calculation Date, shall be excluded, and (3) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its Restricted
Subsidiaries following the Calculation Date.
"Foreign Subsidiaries" means Subsidiaries of our company that are not
Domestic Subsidiaries.
"GAAP" means generally accepted accounting principles described in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the senior subordinated note
indenture.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (1) currency exchange, interest rate or commodity swap
agreements, currency exchange, interest rate or commodity cap agreements and
currency exchange, interest rate or commodity collar agreements and (2) other
agreements or arrangements designed to protect such Person against fluctuations
in currency exchange, interest rates or commodity prices, in each case for the
purpose of risk management and not for speculation.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, if and
to the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person, but excluding from the
definition of "Indebtedness," any of the foregoing that constitutes (1) an
accrued expense, (2) trade payables and (3) Obligations in respect of
reclamation, workers' compensation, including black lung, pensions and retiree
health care, in each case to the extent not overdue for more than 90 days. The
amount of any Indebtedness outstanding as of any date shall be (i) the accreted
value thereof, in the case of any Indebtedness issued with original issue
discount, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of direct or indirect
loans (including guarantees, other than performance guarantees provided for the
benefit of Citizens Power of any portion of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other Acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If our company or any Restricted Subsidiary of our company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of our company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of our company, our company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Marketable Securities" means, with respect to any Asset Sale, any readily
marketable equity securities that are (1) traded on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market; and (2) issued by a
corporation having a total equity market capitalization of not less than $250.0
million; provided that the excess of (A) the aggregate amount of securities of
any one such corporation held by our company and any Restricted Subsidiary over
(B) ten times the average daily trading volume of such securities during the 20
immediately preceding trading days shall be deemed not to be Marketable
Securities; as determined on the date of the contract relating to such Asset
Sale.
"Net Income" means, with respect to any Person, the net income or loss of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (1) any gain or loss,
together
64
with any related provision for taxes on such gain or loss, realized in
connection with (a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (2) any extraordinary or nonrecurring gain or loss, together
with any related provision for taxes on such extraordinary or nonrecurring gain
or loss.
"Net Proceeds" means the aggregate proceeds (cash or property) received by
our company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any noncash consideration received in any Asset Sale) or the sale
or disposition of any Investment, net of the direct costs relating to such Asset
Sale, sale or disposition, (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Non-Guarantor Subsidiaries" means (1) Citizens Power and its direct and
indirect Subsidiaries, (2) our company's future Unrestricted Subsidiaries and
(3) our company's current and future Foreign Subsidiaries.
"Non-Recourse Debt" means Indebtedness (1) as to which neither our company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness) other than a pledge of the Equity Interests of any Unrestricted
Subsidiaries, (b) is directly or indirectly liable (as a guarantor or otherwise)
other than by virtue of a pledge of the Equity Interests of any Unrestricted
Subsidiaries, or (c) constitutes the lender; and (2) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the senior subordinated notes being offered hereby) of our company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity.
"Obligations" means any principal, premium (if any), interest, penalties,
fees, charges, expenses, indemnifications, reimbursement obligations, damages,
guarantees and other liabilities and amounts payable under the documentation
governing any Indebtedness or in respect thereto.
"Permitted Business" means coal production, coal mining, coal brokering,
coal transportation, mine development, power marketing, electricity generation,
power/energy sales and trading, energy transactions/asset restructurings, risk
management products associated with energy, fuel/power integration and other
energy related businesses, ash disposal, environmental remediation, coal,
natural gas, petroleum or other fossil fuel exploration, production, marketing,
transportation and distribution and other related businesses, and activities of
our company and its Subsidiaries as of the date of the closing of the
Acquisition and any business or activity that is reasonably similar thereto or a
reasonable extension, development or expansion thereof or ancillary thereto.
"Permitted Investments" means (a) any Investment in our company or in a
Restricted Subsidiary of our company; (b) any Investment in Cash Equivalents;
(c) any Investment by our company or any Restricted Subsidiary of our company in
a Person, if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary of our company or (ii) such Person, in one transaction or a series of
related transactions, is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
our company or a Restricted Subsidiary of our company; (d) any Acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of our company; (e) any Investment existing on the date of
the closing of the Acquisition (an "Existing Investment") and any Investment
that replaces, refinances or refunds an Existing Investment, provided that the
new Investment is in an amount that does not exceed the amount replaced,
refinanced or refunded and is made in the same Person as the Investment
replaced, refinanced or refunded; (f) advances to employees not in excess of
$10.0 million outstanding at any one time; (g) Hedging Obligations permitted
under clause (9) of the "--Incurrence of Indebtedness and Issuance of Preferred
Stock" covenant; (h) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar expenses, in
each case incurred in the ordinary course of business; (i) any Investment in a
Permitted Business (whether or not an Investment in an Unrestricted Subsidiary)
having an aggregate fair market value, when taken together with all other
Investments made pursuant to this clause (i), does not exceed in aggregate
amount the sum of (1) 10% of Total Assets at the time of such Investment (with
the fair market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value) plus (2) 100% of the Net
Proceeds from the sale or disposition of any Investment previously made pursuant
to this clause (i) or 100% of the amount of any dividend, distribution or
payment from any such Investment, net of income taxes paid or payable in respect
thereof, in each case up to the amount of the Investment that was made pursuant
to this clause (i) and 50% of the amount of such Net Proceeds or 50% of such
dividends, distributions
65
or payments, in each case received in excess of the amount of the Investments
made pursuant to this clause (i); (j) guarantees of Indebtedness permitted under
the covenant "--Incurrence of Indebtedness and Issuance of Preferred Stock;" (k)
any Investment acquired by our company or any of its Restricted Subsidiaries (A)
in exchange for any other Investment or accounts receivable held by our company
or any such Restricted Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the issuer of such
other Investment or accounts receivable or (B) as a result of the transfer of
title with respect to any secured Investment in default as a result of a
foreclosure by our company or any of its Restricted Subsidiaries with respect to
such secured Investment; (l) any Investment in Black Beauty Coal Company having
an aggregate fair market value, taken together with all other Investments made
pursuant to this clause (l), that are at the time outstanding not to exceed
$50.0 million (with any write-down or write-off of any such Investment deemed to
remain outstanding); (m) Investments in Citizens Power having an aggregate fair
market value, taken together with all other Investments made pursuant to this
clause (m), that are at that time outstanding not to exceed $50.0 million at the
time of such Investment (with the fair market value of each Investment being
measured at the time made and without giving effect to subsequent changes in
value); (n) any Investment in the Bengalla Joint Venture and the Warkworth
Associates Joint Venture having an aggregate fair market value, taken together
with all other Investments made pursuant to this clause (n), that are at the
time outstanding, not to exceed $25.0 million (with any write-down or write-off
of any such Investment deemed to remain outstanding); (o) that portion of any
Investment by our company or a Restricted Subsidiary in a Permitted Business to
the extent that our company or such Restricted Subsidiary will receive in a
substantially concurrent transaction an amount in cash equal to the amount of
such Investment (or the fair market value of such Investment), net of any
obligation to pay taxes or other amounts in respect of the receipt of such cash;
provided that the receipt of such cash does not carry any obligation by our
company or such Restricted Subsidiary to repay or return such cash; and (p) the
forgiveness or cancellation of any payable due from Citizens Power and its
direct and indirect Subsidiaries outstanding on the date of the closing of the
Acquisition; provided, however, that with respect to any Investment, our company
may, in its sole discretion, allocate all or any portion of any Investment to
one or more of the above clauses so that the entire Investment would be a
Permitted Investment.
"Permitted Liens" means (1) Liens securing Indebtedness under Credit
Facilities that were permitted by the terms of the senior subordinated note
indenture to be incurred; (2) Liens in favor of our company; (3) Liens on
property of a Person existing at the time such Person is merged into or
consolidated with our company or any Restricted Subsidiary of our company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with our company; (4) Liens on property
existing at the time of Acquisition thereof by our company or any Restricted
Subsidiary of our company, provided that such Liens were in existence prior to
the contemplation of such Acquisition; (5) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (6)
Liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance or other kinds of social
security; (7) Liens existing on the date of the closing of the Acquisition; (8)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (9) Liens on assets of senior subordinated note guarantors
to secure Senior Debt of such senior subordinated note guarantors that was
permitted by the senior subordinated note indenture to be incurred; (10) Liens
incurred in the ordinary course of business of our company or any Restricted
Subsidiary of our company with respect to obligations that (a) are not incurred
in connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by our company or such
Restricted Subsidiary; (11) Liens on assets of Foreign Subsidiaries to secure
Indebtedness that was permitted by the senior subordinated note indenture to be
incurred; (12) statutory liens of landlords, mechanics, suppliers, vendors,
warehousemen, carriers or other like Liens arising in the ordinary course of
business; (13) judgment Liens not giving rise to an Event of Default so long as
any appropriate legal proceeding that may have been duly initiated for the
review of such judgment shall not have been finally terminated or the period
within which such legal proceeding may be initiated shall not have expired; (14)
easements, rights-of-way, zoning and similar restrictions and other similar
encumbrances or title defects incurred or imposed, as applicable, in the
ordinary course of business and consistent with industry practices which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto (as such
property is used by our company or its Subsidiaries) or interfere with the
ordinary conduct of the business of our company or such Subsidiaries; provided,
however, that any such Liens are not incurred in connection with any borrowing
of money or any commitment to loan any money or to extend any credit; (15) Liens
to secure Indebtedness (including Capital Lease Obligations) permitted by clause
(6) of the second paragraph of the covenant entitled "Incurrence of Indebtedness
and Issuance of Preferred Stock" and other purchase money Liens to finance
property or assets of our company or any Restricted Subsidiary acquired in the
ordinary course of business; provided that such Liens are only secured by such
property or assets so acquired or improved (including, in the case of the
Acquisition of
66
capital stock of a Person who becomes a Restricted Subsidiary, Liens on the
assets of the Person whose capital stock was so acquired); (16) Liens securing
Indebtedness under Hedging Obligations; provided that such Liens are only
secured by property or assets that secure the Indebtedness subject to the
Hedging Obligation; (17) Liens to secure Indebtedness permitted by clause (15)
of the second paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock;" and (18) Liens on the Equity Interests of
Unrestricted Subsidiaries securing obligations of Unrestricted Subsidiaries not
otherwise prohibited by the senior subordinated notes indenture.
"Permitted Refinancing Indebtedness" means any Indebtedness of our company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of our company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (1) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest and premium, if any, on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (2) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the senior subordinated notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the senior
subordinated notes on terms at least as favorable to the holders of senior
subordinated notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (4) such Indebtedness is incurred either by our company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Credit Facilities" means those certain Senior Credit Facilities,
dated as of May 18, 1998, by and among our company, the senior note guarantors,
Lehman Commercial Paper Inc., as Arranger, Syndication Agent and the
Administrative Agent and the other lenders party thereto, including any related
notes, guarantees, collateral documents, letters of credit, instruments and
agreements executed in connection therewith (and any appendices, exhibits or
schedules to any of the foregoing), and in each case as amended, modified,
supplemented, restated, renewed, refunded, replaced, restructured, repaid or
refinanced from time to time (whether with the original agents and lenders or
other agents and lenders or otherwise, and whether provided under the original
credit agreement or other credit agreements or otherwise).
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
under the Securities Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (1) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or senior
subordinated note trustees thereof is at the time owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (2) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person or of
one or more Subsidiaries of such Person (or any combination thereof).
"Total Assets" means the total assets of our company and its Restricted
Subsidiaries on a consolidated basis determined in accordance with GAAP, as
shown on the most recently available consolidated balance sheet of our company
and its Restricted Subsidiaries.
"Transaction Documents" means the documents related to (1) the Acquisition
(including, without limitation, the purchase agreement, the participation
agreement and the escrow agreement), (2) the Senior Credit Facilities and (3)
the original offering of the notes.
67
"Treasury Rate" means the yield to maturity at the time of the computation
of the United States Treasury securities with a constant maturity (as compiled
by and published in the most recent Federal Reserve Statistical Release
H.15(519), which has become publicly available at least two Business Days prior
to the date fixed for redemption (or if such Statistical Release is no longer
published, any publicly available source of similar market data)) most nearly
equal to the then remaining average life to May 15, 2003; provided, however,
that if the average life of such senior subordinated note is not equal to the
constant maturity of the United States Treasury security for which weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the average life of such senior subordinated note is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Unrestricted Subsidiary" means (1) Citizens Power, any direct or indirect
Subsidiary of Citizens Power on the date of the senior subordinated note
indenture and (2) any Subsidiary that is designated by the Board of Directors as
an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the
extent that such Person: (a) has no Indebtedness other than Non-Recourse Debt;
(b) is not party to any agreement, contract, arrangement or understanding with
our company or any Restricted Subsidiary of our company unless the terms of any
such agreement, contract, arrangement or understanding are no less favorable to
our company or such Restricted Subsidiary than those that might be obtained at
the time from Persons who are not Affiliates of our company; (c) is a Person
with respect to which neither our company nor any of its Restricted Subsidiaries
has any obligation (x) to subscribe for additional Equity Interests in
Unrestricted Subsidiaries (except with respect to Permitted Investments) or (y)
to maintain or preserve such Person's net worth; and (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
our company or any of its Restricted Subsidiaries; provided, however, that our
company and its Restricted Subsidiaries may guarantee the performance of
Unrestricted Subsidiaries in the ordinary course of business except for
guarantees of Obligations in respect of borrowed money. Any such designation by
the Board of Directors shall be evidenced to the senior subordinated note
trustee by filing with the senior subordinated note trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described above under the caption
"Certain Covenants--Restricted Payments."
"Voting Stock" of any Person as of any date means the capital stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Warkworth Associates Joint Venture" means Warkworth Coal Sales Ltd.,
Warkworth Pastoral Co. Pty, Limited and Warkworth Mining Limited, which are the
joint venture companies related to the Warkworth mine in New South Wales,
Australia.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding capital stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding capital stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
68
PLAN OF DISTRIBUTION
This prospectus is to be used by Lehman Brothers Inc. in connection with
offers and sales of the notes in market-making transactions effected from time
to time. Lehman Brothers Inc. may act as a principal or agent in those
transactions, including as agent for the counterparty when acting as principal
or as agent for both counterparties, and may receive compensation in the form of
discounts and commissions, including from both counterparties when it acts as
agent for both. These sales will be made at prevailing market prices at the time
of sale, at prices related thereto or at negotiated prices.
Affiliates of Lehman Brothers Inc. beneficially owned 57% of our capital
stock on a pro forma basis, after giving effect to our initial public offering
of 15 million shares of our common stock and the exercise by the related
underwriters of an over-allotment option to purchase an additional 2,250,000
shares of our common stock. Because Lehman Brothers Inc. may purchase and sell
notes, and because this prospectus may be used by Lehman Brothers Inc. in
connection with future offers and sales of notes in market-making transactions
effected from time to time, no estimate can be given as to the number and
percentage of notes that will be held by Lehman Brothers Inc. upon termination
of any of those sales. Lehman Brothers Inc. has informed us that it does not
intend to confirm sales of the notes to any accounts over which it exercises
discretionary authority without the prior specific written approval of those
transactions by the customer.
We have been advised by Lehman Brothers Inc. that, subject to applicable
laws and regulations, Lehman Brothers Inc. currently intends to make a market in
the notes. However, Lehman Brothers Inc. is not obligated to do so and any
market-making may be interrupted or discontinued at any time without notice. In
addition, that market-making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act. There can be no assurance that an
active trading market will develop or be sustained. See "Risk Factors--There Is
No Trading Market for the Notes."
Lehman Brothers Inc. has provided investment banking services to us in the
past and has received customary fees for those services, and may provide those
services and financial advisory services to us in the future. Lehman Brothers
Inc. acted as purchaser in connection with the initial sale of the notes.
Lehman Brothers Inc. has entered into a registration rights agreement with
us with respect to the use by Lehman Brothers Inc. of this prospectus. Under
that agreement, we agreed to bear all registration expenses incurred under that
agreement, and we agreed to indemnify Lehman Brothers Inc. against specified
liabilities, including liabilities under the Securities Act.
Messrs. Goodspeed, Herlihy, Lentz and Washkowitz, each one of our
directors, are also each Managing Directors of Lehman Brothers Inc.
LEGAL MATTERS
Certain legal matters will be passed upon for us by Simpson Thacher &
Bartlett, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our annual report on Form 10-K/A for the year
ended March 31, 2001, as set forth in their report, which is incorporated by
reference in the prospectus. Our financial statements are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing. The estimates of our proven and probable
coal reserves referred to in information incorporated by reference, to the
extent described in that information, have been prepared by us and reviewed by
Marshall Miller & Associates.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and current reports and other information with
the SEC. You may access and read our SEC filings, including the complete
registration statement and all of the exhibits to it, through the SEC's Internet
site at www.sec.gov. This site contains reports and other information that we
file electronically with the SEC. You may also read and copy any document we
file at the SEC's public reference room located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at l-800-SEC-0330 for further
information on the public reference room.
We have filed with the SEC a registration statement under the Securities
Act with respect to the notes offered by this prospectus. This prospectus, which
constitutes part of the registration statement, does not contain all of the
information presented in the registration statement and its exhibits and
schedules. Our descriptions in this prospectus of the provisions of
69
documents filed as exhibits to the registration statement or otherwise filed
with the SEC are only summaries of the terms of those documents that we consider
material. If you want a complete description of the content of the documents,
you should obtain the documents yourself by following the procedures described
above.
Our Annual Report on Form 10-K/A for the fiscal year ended March 31, 2001
(filed with the SEC on July 3, 2001), is incorporated herein by reference.
All documents and reports we filed with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Statement and on
or prior to the termination of the Offer shall be deemed to be incorporated
herein by reference and shall be deemed to be a part hereof from the date of
filing of such documents and reports. Any statement contained in a document or
report incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Statement to the extent
that a statement contained herein or in any subsequently filed document or
report that also is or is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
You may request copies of the filings, at no cost, by telephone at (314)
342-3400 or by mail at: Peabody Energy Corporation, 701 Market Street, Suite
700, St. Louis, Missouri 63101, attention: Public Relations.
70
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides that, among
other things, a corporation may indemnify directors and officers as well as
other employees and agents of the corporation against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement in connection
with specified actions, suits or proceedings, whether civil, criminal,
administrative or investigative (other than action by or in the right of the
corporation a "derivative action"), if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
by-laws, disinterested director vote, stockholder vote, agreement or otherwise.
Article Sixth of the registrant's third amended and restated certificate
of incorporation and Article IV of the registrant's amended and restated by-laws
requires indemnification to the fullest extent permitted by Delaware law. The
registrant has also obtained officers' and directors' liability insurance which
insures against liabilities that officers and directors of the registrant, in
such capacities, may incur. The registrant's third amended and restated
certificate of incorporation requires the advancement of expenses incurred by
officers or directors in relation to any action, suit or proceeding.
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duties as a director,
except for liability (i) for any transaction from which the director derives an
improper personal benefit, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law (certain illegal
distributions) or (iv) for any breach of a director's duty of loyalty to the
company or its stockholders. Article Eleven of the registrant's certificate of
incorporation includes such a provision.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit
4.1 Senior Note Indenture dated as of May 18, 1998 between the Registrant
and State Street Bank and Trust Company, as Senior Note Trustee
(Incorporated by reference to Exhibit 4.1 of the Registrant's Form S-4
Registration Statement No. 333-59073).
4.2 Senior Subordinated Note Indenture dated as of May 18, 1998 between
the Registrant and State Street Bank and Trust Company, as Senior
Subordinated Note Trustee (Incorporated by reference to Exhibit 4.2 of
the Registrant's Form S-4 Registration Statement No. 333-59073).
4.3 First Supplemental Senior Note Indenture dated as of May 19, 1998
among the Guaranteeing Subsidiary (as defined therein), the
Registrant, the other Senior Note Guarantors (as defined in the Senior
Note Indenture) and State Street Bank and Trust Company, as Senior
Note Trustee (Incorporated by reference to Exhibit 4.3 of the
Registrant's Form S-4 Registration Statement No. 333-59073).
4.4 First Supplemental Senior Subordinated Note Indenture dated as of May
19, 1998 among the Guaranteeing Subsidiary (as defined therein), the
Registrant, the other Senior Subordinated Note Guarantors (as defined
in the Senior Subordinated Note Indenture) and State Street Bank and
Trust Company, as Senior Subordinated Note Trustee (Incorporated by
reference to Exhibit 4.4 of the Registrant's Form S-4 Registration
Statement No. 333-59073).
4.5 Notation of Senior Subsidiary Guarantee dated as of May 19, 1998 among
the Senior Note Guarantors (as defined in the Senior Note Indenture)
(Incorporated by reference to Exhibit 4.5 of the Registrant's Form S-4
Registration Statement No. 333-59073).
II-1
4.6 Notation of Subordinated Subsidiary Guarantee dated as of May 19, 1998
among the Senior Note Guarantors (as defined in the Senior
Subordinated Note Indenture) (Incorporated by reference to Exhibit 4.6
of the Registrant's Form S-4 Registration Statement No. 333-59073).
4.7 Senior Note Registration Rights Agreement dated as of May 18, 1998
between the Registrant and Lehman Brothers Inc. (Incorporated by
reference to Exhibit 4.7 of the Registrant's Form S-4 Registration
Statement No. 333-59073).
4.8 Senior Subordinated Note Registration Rights Agreement dated as of May
18, 1998 between the Registrant and Lehman Brothers Inc. (Incorporated
by reference to Exhibit 4.8 of the Registrant's Form S-4 Registration
Statement No. 333-59073).
4.9 Second Supplemental Senior Note Indenture dated as of December 31,
1998 among the Guaranteeing Subsidiary Second Supplemental Senior Note
Indenture dated as of December 31, 1998 among the Guaranteeing
Subsidiary (as defined therein), the Registrant, the other Senior Note
Guarantors (as defined in the Senior Note Indenture) and State Street
Bank and Trust Company, as Senior Note Trustee (Incorporated by
reference to Exhibit 4.9 of the Registrant's Form 10-Q for the quarter
ended December 31, 1999).
4.10 Second Supplemental Senior Subordinated Note Indenture dated as of
December 31, 1998 among the Guaranteeing Subsidiary (as defined
therein), the Registrant, the other Senior Subordinated Note
Guarantors (as defined in the Senior Subordinated Note Indenture) and
State Street Bank and Trust Company, as Senior Subordinated Note
Trustee (Incorporated by reference to Exhibit 4.10 of the Registrant's
Form l0-Q for the quarter ended December 31, 1999).
4.11 Third Supplemental Senior Note Indenture dated as of June 30, 1999
among the Guaranteeing Subsidiary (as defined therein), the
Registrant, the other Senior Note Guarantors (as defined in the Senior
Note Indenture) and State Street Bank and Trust Company, as Senior
Note Trustee (Incorporated by reference to Exhibit 4.11 of the
Registrant's Form 10-Q for the quarter ended December 31, 1999).
4.12 Third Supplemental Senior Subordinated Note Indenture dated as of June
30, 1999 among the Guaranteeing Subsidiary (as defined therein), the
Registrant, the other Senior Subordinated Note Guarantors (as defined
in the Senior Subordinated Note Indenture) and State Street Bank and
Trust Company, as Senior Subordinated Note Trustee (Incorporated by
reference to Exhibit 4.12 of the Registrant's Form 10-Q for the
quarter ended December 31, 1999).
4.13 Fourth Supplemental Senior Note Indenture dated as of February 16,
2000 among the Guaranteeing Subsidiary (as defined therein), the
Registrant, the other Senior Note Guarantors (as defined in the Senior
Note Indenture) and State Street Bank and Trust Company, as Senior
Note Trustee.
4.14 Fourth Supplemental Senior Subordinated Note Indenture dated as
February 16, 2000 among the Guaranteeing Subsidiary (as defined
therein), the Registrant, the other Senior Subordinated Note
Guarantors (as defined in the Senior Subordinated Note Indenture) and
State Street Bank and Trust Company, as Senior Subordinated Note
Trustee.
4.15 Fifth Supplemental Senior Note Indenture dated as of March 27, 2000
among the Guaranteeing Subsidiary (as defined therein), the
Registrant, the other Senior Note Guarantors (as defined in the Senior
Note Indenture) and State Street Bank and Trust Company, as Senior
Note Trustee.
4.16 Fifth Supplemental Senior Subordinated Note Indenture dated as of
March 27, 2000 among the Guaranteeing Subsidiary (as defined therein),
the Registrant, the other Senior Subordinated Note Guarantors (as
defined in the Senior Subordinated Note Indenture) and State Street
Bank and Trust Company, as Senior Subordinated Note Trustee.
5.1 Opinion of Simpson Thacher & Bartlett.
12 Statement re: computation of ratios.
23.1 Consent of Simpson Thacher & Bartlett (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, Independent Auditors.
23.3 Consent of Marshall Miller & Associates.
24 Powers of Attorney.
II-2
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8, or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by the Issuer pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Issuer's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY ENERGY CORPORATION
By: *
--------------------------
Irl F. Engelhardt
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* Chairman, Chief Executive Officer and Director
--------------------------------------- (Principal Executive Officer)
Irl F. Engelhardt
* President, Chief Operating Officer and Director
---------------------------------------
Richard M. Whiting
* Executive Vice President and Chief Financial Officer
--------------------------------------- (Principal Financial and Accounting Officer)
Richard A. Navarre
* Vice President, Assistant Secretary and Director
---------------------------------------
Henry E. Lentz
* Director
---------------------------------------
Roger H. Goodspeed
* Director
---------------------------------------
Alan H. Washkowitz
* Director
---------------------------------------
Bernard J. Duroc-Danner
* Director
---------------------------------------
William E. James
* Director
---------------------------------------
Charles W. Mueller
* Director
---------------------------------------
Felix Herlihy
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
AFFINITY MINING COMPANY
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President & Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
----------------------------------------
Attorney-In-Fact
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
ARID OPERATIONS, INC.
By: *
--------------------------
Roger B.Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Roger B.Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
BIG SKY COAL COMPANY
By: *
----------------------------
Terry G. Traylor
Vice President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* Vice President
---------------------------------------
Terry G. Traylor
* Treasurer and Assistant Secretary
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
- Ian S. Craig
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
Attorney-In-Fact
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
BLUEGRASS COAL COMPANY
By: *
-------------------------
John C. Hill
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
John C. Hill
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
----------------------------------------
Attorney-In-Fact
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
CABALLO COAL COMPANY
By: *
--------------------------
Ian S. Craig
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Ian S. Craig
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
----------------------------------------
Attorney-In-Fact
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
CHARLES COAL COMPANY
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
----------------------------------------
Attorney-In-Fact
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
CLEATON COAL COMPANY
By: *
--------------------------
Steven F. Schaab
Vice President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
COAL PROPERTIES CORP.
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
----------------------------------------
Attorney-In-Fact
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
COLONY BAY COAL COMPANY
By Eastern Associated Coal Corp.,
its General Partner
By: *
--------------------------------
Jiri Nemec
President
of Eastern Associated Coal Corp.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
EASTERN ASSOCIATED COAL CORP.
A General Partner
By: * President and Director of Eastern Associated Coal
--------------------------------------- Corp.
Jiri Nemec
* Vice President and Treasurer of Eastern
--------------------------------------- Associated Coal Corp.
T. L. Bethel
* Director of Eastern Associated Coal Corp.
---------------------------------------
Richard M. Whiting
CHARLES COAL COMPANY
A General Partner
By: * President and Director of Charles Coal Company
---------------------------------------
Jiri Nemec
* Vice President and Treasurer of Charles Coal
---------------------------------------
T. L. Bethel Company
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
COOK MOUNTAIN COAL COMPANY
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
COTTONWOOD LAND COMPANY
By: *
--------------------------
Roger B.Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Roger B.Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
EACC CAMPS, INC.
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
EASTERN ASSOCIATED COAL CORP.
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
EASTERN ROYALTY CORP.
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
GALLO FINANCE COMPANY
By: *
--------------------------
John L. Wasik
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
John L. Wasik
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Roger B. Walcott, Jr.
* Director
---------------------------------------
George J. Holway
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
GOLD FIELDS CHILE, S.A.
By: *
--------------------------
Roger B.Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Roger B.Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
GOLD FIELDS MINING CORPORATION
By: *
--------------------------
Roger B.Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Roger B.Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
* Director
---------------------------------------
Collon C. Kennedy
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-21
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
GOLD FIELDS OPERATING COMPANY -ORTIZ
By: *
--------------------------
Roger B.Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Roger B.Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
* Director
---------------------------------------
Collon C. Kennedy
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-22
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
GRAND EAGLE MINING, INC.
By: *
--------------------------
John C. Hill
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Roger B.Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
* Director
---------------------------------------
Collon C. Kennedy
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
HAYDEN GULCH TERMINAL, INC.
By: *
--------------------------
John L. Wasik
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
John L. Wasik
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-24
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
HIGHLAND MINING COMPANY
By: *
--------------------------
Steven F. Schaab
Vice President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* Vice President
---------------------------------------
Steven F. Schaab
* Vice President and Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Fredrick D. Palmer
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-25
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
HILLSIDE MINING COMPANY
By: *
---------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-26
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
INDEPENDENCE MATERIAL HANDLING COMPANY
By: *
--------------------------
Roger B.Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Roger B.Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-27
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
INTERIOR HOLDINGS CORP.
By: *
--------------------------
Irl F. Engelhardt
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Irl F. Engelhardt
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-28
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
JAMES RIVER COAL TERMINAL COMPANY
By: *
-------------------------------
Paul H. Vining
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Paul H. Vining
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Roger B.Walcott, Jr.
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-29
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
JUNIPER COAL COMPANY
By: *
--------------------------
Roger B.Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President
---------------------------------------
Roger B.Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
* Director
---------------------------------------
R. D. Robison
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-30
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
KAYENTA MOBILE HOME PARK, INC.
By: *
--------------------------
John L. Wasik
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
John L. Wasik
* Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-31
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
MARTINKA COAL COMPANY
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-32
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
MIDCO SUPPLY AND EQUIPMENT CORPORATION
By: *
--------------------------
George J. Holway
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President
---------------------------------------
George J. Holway
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
* Director
---------------------------------------
Roger B.Walcott, Jr.
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-33
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
MOUNTAIN VIEW COAL COMPANY
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-34
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
NORTH PAGE COAL CORP.
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-35
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
OHIO COUNTY COAL COMPANY
By: *
--------------------------
John C. Hill
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
John C. Hill
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-36
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PATRIOT COAL COMPANY, L.P.
By: *
--------------------------
Bluegrass Coal Company
Its Managing Partner
By: *
--------------------------
John C. Hill
President of Bluegrass Coal Company
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
BLUEGRASS COAL COMPANY
Its Managing Partner
By: * President and Director of Bluegrass Coal
--------------------------------------- Company
John C. Hill
* Vice President and Treasurer of Bluegrass Coal
--------------------------------------- Company
Steven F. Schaab
* Director of Bluegrass Coal Company
---------------------------------------
Richard A. Navarre
SENTRY MINING COMPANY
A Partner
By: * President and Director of Sentry Mining Company
---------------------------------------
John C. Hill
* Vice President and Treasurer of Sentry Mining
--------------------------------------- Company
Steven F. Schaab
* Director of Sentry Mining Company
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-37
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY AMERICA, INC.
By: *
--------------------------
Roger B.Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Roger B.Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By /s/ JEFFERY L. KLINGER
------------------------------------
Attorney-In-Fact
II-38
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY COAL COMPANY
By: *
--------------------------
Steven F. Schaab
Vice President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* Vice President
- ---------------------------------------
Steven F. Schaab
* Vice President and Treasurer
- ---------------------------------------
T. L. Bethel
* Director
- ---------------------------------------
J. D. Palmer
* Director
- ---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
- ---------------------------------------
Attorney-In-Fact
II-39
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY COALSALES COMPANY
By: *
--------------------------
Paul H. Vining
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Paul H. Vining
* Director
---------------------------------------
Roger B. Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
----------------------------------
Attorney-In-Fact
II-40
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY COALTRADE, INC.
By: *
--------------------------
Stephen L. Miller
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
* President and Director
---------------------------------------
Stephen L. Miller
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Roger B.Walcott, Jr.
* Director
---------------------------------------
Paul H. Vining
*By: /s/ JEFFERY L. KLINGER
----------------------------------------
Attorney-In-Fact
II-41
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY DEVELOPMENT COMPANY
By: *
--------------------------
Roger B.Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
- ---------------------------------------
Roger B.Walcott, Jr.
* Vice President and Treasurer
- ---------------------------------------
Steven F. Schaab
* Director
- ---------------------------------------
Kemal Williamson
* Director
- ---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
----------------------------------
Attorney-In-Fact
--------------------------------------
II-42
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY DEVELOPMENT LAND HOLDINGS, LLC
By: *
-----------------------------------
Roger B. Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President
---------------------------------------
Roger B. Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
*By: /s/ JEFFERY L. KLINGER
-----------------------------------
Attorney-In-Fact
II-43
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY ENERGY SOLUTIONS, INC.
By: *
--------------------------
Paul H. Vining
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
- --------------------------------------
Paul H. Vining
* Vice President and Treasurer
- --------------------------------------
Steven F. Schaab
* Director
- --------------------------------------
Roger B.Walcott, Jr.
* Director
- --------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
----------------------------------
Attorney-In-Fact
II-44
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY HOLDING COMPANY, INC.
By: *
----------------------------------
Irl F. Engelhardt
Chairman & Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* Chairman, Chief Executive Officer and Director
- ---------------------------------------
Irl F. Engelhardt
* Executive Vice President and Chief Financial Officer
- ---------------------------------------
Richard A. Navarre
* Director
- ---------------------------------------
Roger B.Walcott, Jr.
* Director
- ---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
----------------------------------
Attorney-In-Fact
II-45
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY NATURAL GAS, LLC
By: *
------------------------------------
Roger B. Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President
---------------------------------------
Roger B. Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
*By: /s/ JEFFERY L. KLINGER
-----------------------------------
Attorney-In-Fact
II-46
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement or to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY NATURAL RESOURCES COMPANY
By: *
----------------------------------------------
Gold Fields Mining Corporation
Its General Partner
By: *
-----------------------------------------------
Roger B.Walcott, Jr.
President of Gold Fields Mining Corporation
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
GOLD FIELDS MINING
CORPORATION
A General Partner
By: * President and Director of Gold Fields Mining
--------------------------------------- Corporation
Roger B.Walcott, Jr.
* Director of Gold Fields Mining Corporation
---------------------------------------
Richard A. Navarre
* Director of Gold Fields Mining Corporation
---------------------------------------
Collon C. Kennedy
PEABODY AMERICA, INC.
A General Partner
By: * President and Director of Peabody America, Inc.
---------------------------------------
Roger B.Walcott, Jr.
* Vice President and Treasurer of Peabody America, Inc.
---------------------------------------
Steven F. Schaab
* Director of Peabody America, Inc.
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-47
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY SOUTHWESTERN COAL COMPANY
By: *
--------------------------
Steven F. Schaab
Vice President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* Vice President and Assistant Treasurer
- ----------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard M. Whiting
* Director
---------------------------------------
John L. Wasik
* Director
---------------------------------------
G. Bradley Brown
*By: /s/ JEFFERY L. KLINGER
-----------------------------------
Attorney-In-Fact
II-48
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY TERMINALS, INC.
By: *
----------------------------------
Paul H. Vining
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
- ---------------------------------------
Paul H. Vining
* Vice President and Treasurer
- ---------------------------------------
Steven F. Schaab
* Director
- ---------------------------------------
Richard A. Navarre
* Director
- ---------------------------------------
Roger B.Walcott, Jr.
*By: /s/ JEFFERY L. KLINGER
-----------------------------------
Attorney-In-Fact
II-49
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY VENEZUELA COAL CORP.
By: *
-------------------------------
Roger B.Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
- ---------------------------------------
Roger B.Walcott, Jr.
* Vice President and Treasurer
- ---------------------------------------
Steven F. Schaab
* Director
- ---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------
Attorney-In-Fact
II-50
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PEABODY WESTERN COAL COMPANY
By: *
--------------------------------
John L. Wasik
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
- ---------------------------------------
John L. Wasik
* Treasurer
- ---------------------------------------
T. L. Bethel
* Director
- ---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
-----------------------------------
Attorney-In-Fact
II-51
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PINE RIDGE COAL COMPANY
By: *
------------------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
- ---------------------------------------
Jiri Nemec
* Vice President and Treasurer
- ---------------------------------------
T. L. Bethel
* Director
- ---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
----------------------------------
Attorney-In-Fact
II-52
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PORCUPINE PRODUCTION, LLC
By: *
--------------------------
Roger B. Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President
---------------------------------------
Roger B. Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
*By: /s/ JEFFERY L. KLINGER
-----------------------------------
Attorney-In-Fact
II-53
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
PORCUPINE TRANSPORTATION, LLC
By: *
--------------------------
Roger B. Walcott, Jr.
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President
---------------------------------------
Roger B. Walcott, Jr.
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
*By: /s/ JEFFERY L. KLINGER
-----------------------------------
Attorney-In-Fact
II-54
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
POWDER RIVER COAL COMPANY
By: *
--------------------------
Ian S. Craig
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
- ---------------------------------------
Ian S. Craig
* Vice President and Treasurer
- ---------------------------------------
Steven F. Schaab
* Director
- ---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
----------------------------------
Attorney-In-Fact
II-55
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
RIO ESCONDIDO COAL CORP.
By: *
--------------------------
John L. Wasik
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
* President and Director
---------------------------------------
John L. Wasik
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
* Director
---------------------------------------
Roger B.Walcott, Jr.
*By: /s/ JEFFERY L. KLINGER
---------------------------------
Attorney-In-Fact
II-56
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
RIVERS EDGE MINING, INC.
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-57
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
RIVERVIEW TERMINAL COMPANY
By: *
--------------------------
Stephen L. Miller
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President
---------------------------------------
Stephen L. Miller
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*
---------------------------------------
Director
Collon C. Kennedy
*
---------------------------------------
Director
Roger B. Walcott, Jr.
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-58
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
SENECA COAL COMPANY
By: *
--------------------------
John L. Wasik
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
John L. Wasik
* Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-59
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
SENTRY MINING COMPANY
By: *
--------------------------
John C. Hill
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
John C. Hill
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard A. Navarre
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-60
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
SNOWBERRY LAND COMPANY
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
--------------------------------------
Attorney-In-Fact
II-61
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
STERLING SMOKELESS COAL COMPANY
By: *
--------------------------
Jiri Nemec
President
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* President and Director
---------------------------------------
Jiri Nemec
* Vice President and Treasurer
---------------------------------------
T. L. Bethel
* Director
---------------------------------------
Richard M. Whiting
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-62
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 9, 2001.
THOROUGHBRED, L.L.C.
By: *
--------------------------
Irl F. Engelhardt
Chairman
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 9th day of August, 2001 by the following
persons in the capacities indicated:
Signature Title
--------- -----
* Chairman
---------------------------------------
Irl F. Engelhardt
* Vice President and Treasurer
---------------------------------------
Steven F. Schaab
*By: /s/ JEFFERY L. KLINGER
---------------------------------------
Attorney-In-Fact
II-63